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Financial statements and report of independent certified public accountants

Financial statements and report of independent certified
public accountants
University of Oklahoma Health Sciences Center
June 30, 2010 and 2009
C O N T E N T S
Page
MANAGEMENT’S DISCUSSION AND ANALYSIS i
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3
FINANCIAL STATEMENTS
STATEMENTS OF NET ASSETS 5
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS 6
STATEMENTS OF CASH FLOWS 7
NOTES TO FINANCIAL STATEMENTS 9
REQUIRED SUPPLEMENTARY INFORMATION 38
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS 39
i
UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
Management’s Discussion and Analysis
The discussion and analysis of The University of Oklahoma Health Sciences Center’s (the “Center”) financial
statements provides an overview of the Center’s financial activities for the years ending June 30, 2010 and
2009. Management has prepared the financial statements and the related footnote disclosures along with the
discussion and analysis.
Financial Highlights
2010
The Center’s financial position, as a whole, improved during the fiscal year ending June 30, 2010. Net assets
increased approximately $25 million or 3.5% over the previous year. The change resulted from increases in
invested in capital assets of $29.6 million, unrestricted net assets of $10.1 million, and a decrease in restricted
net assets of $14.7 million.
2009
The Center’s financial position, as a whole, improved during the fiscal year ending June 30, 2009. Net assets
increased approximately $51.7 million or 7.8% over the previous year. The change resulted from increases in
restricted net assets of $65.9 million, unrestricted net assets of $11.8 million, and a decrease in invested in
capital assets of $26 million.
The following graph illustrates the comparative change in net assets by category for the periods ended June
30:
Net Assets
302.3
185.4
254.3 244.2
298.7
134.2
232.4
200.1
272.7
0
50
100
150
200
250
300
350
Invested in Capital
Assets
Restricted Unrestricted
(in millions)
2010 2009 2008
ii
Overview of the Financial Statements and Financial Analysis
This report consists of Management’s Discussion and Analysis (this part), the Statements of Net Assets, the
Statements of Revenues, Expenses, and Changes in Net Assets, and the Statements of Cash Flows. These
statements provide both long-term and short-term financial information on the Center as a whole.
The Statement of Net Assets and Statement of Revenues, Expenses, and Changes in Net Assets
The Statement of Net Assets and the Statement of Revenues, Expenses, and Changes in Net Assets report
the Center’s net assets and how they have changed. Net assets—the difference between assets and
liabilities—is one way to measure the Center’s financial health, or position. Over time, increases or decreases
in the Center’s net assets are an indicator of whether its financial health is improving. Non-financial factors
are also important to consider, including student enrollment, condition of campus buildings, patient census,
and trends in national health care reimbursement policies.
These statements include all assets and liabilities using the accrual basis of accounting, which is consistent
with the accounting used by private-sector institutions. All of the current year’s revenues and expenses are
recognized when earned or incurred, regardless of when cash is received or paid.
The following summarizes the Center’s assets, liabilities, and net assets as of June 30, as well as, the Center’s
revenues, expenses, and changes in net assets for the periods ended June 30:
2010 2009 2008
Current Assets $ 528.6 $ 485.4 $ 369.8
Capital Assets, net 450.2 393.9 336.0
Other Noncurrent Assets 51.1 77.3 106.0
Total Assets 1,029.9 956.6 811.8
Current Liabilities 92.5 81.1 69.2
Noncurrent Liabilities 195.4 158.5 77.3
Total Liabilities 287.9 239.6 146.5
Net Assets:
Invested in Capital Assets,
net of related debt 302.3 272.7 298.7
Restricted 185.4 200.1 134.2
Unrestricted 254.3 244.2 232.4
Total Net Assets $ 742.0 $ 717.0 $ 665.3
Increase in Net Assets $ 25.0 $ 51.7
Net Assets, End of Year (in millions)
iii
Statement of Revenues, Expenses, and Changes in Net Assets (in millions)
2010 2009 2008
Operating Revenues $ 624.9 $ 600.5 $ 561.7
Operating Expenses 751.0 715.8 690.6
Operating Income (Loss) $ (126.1) $ (115.3) $ (128.9)
Net Nonoperating Revenues 139.9 135.0 135.6
Other Revenues, Expenses, and Gains or Losses 11.2 32.0 40.0
Net Change in Net Assets $ 25.0 $ 51.7 $ 46.7
Net Assets - Beginning of year 717.0 665.3 618.6
Net Assets - End of year $ 742.0 $ 717.0 $ 665.3
Operating Revenues
Significant changes in operating revenues included the following:
2010
Student tuition and fees revenue increased 2% or $1.0 million in fiscal year 2010. This was due to a new
technology services fee of $40.00 per credit hour being added in the College of Allied Health and an increase
in the technology services fee of $5.00 per credit hour in the College of Dentistry. There also was a small
increase in overall enrollment.
Patient care increased significantly over the past year with additional revenues of $11.3 million. This was due
to increased patient volume, primarily in the departments of Pediatrics and Anesthesiology.
Federal grants and contracts increased during the year by $2.2 million. Sponsored program awards funded
under the American Recovery and Reinvestment Act (ARRA) comprised the majority of the increase in
activity.
Private grants and contracts increased significantly during 2010 with additional revenues of $7.2 million. The
increase was primarily due to increased funding received from the OU Medical Center for mission support.
Sales and services of auxiliary enterprises had a decrease in revenues during 2010 of $1.3 million. This was
primarily due to a decrease in Steam and Chilled Water sales. Lower utility costs resulted in lower revenue
from this unit’s sales. Completion of the network equipment and cabling project for the OU Physicians’
Building in the prior fiscal year negatively impacted current year sales on a comparative basis.
Other revenues increased $4 million during the year. This was due to a 15% increase in sales at the OU
Pharmacist Care Center and a new autistic/special needs children training contract received by the
department of Pediatrics.
2009
Student tuition and fees revenue increased 15% or $7.4 million in fiscal year 2009. This was due to a general
tuition increase in all programs ranging from 2% - 9.9%. A new fee was added for use of the University
iv
Operating Revenues--Continued
Health Club and the Library Resource Fee was increased by $2.50 per hour. Enrollment also increased
during the year in the professional and undergraduate programs by 43 and 154 students, respectively.
Patient care increased significantly over the past year with additional revenues of $23.7 million. This was due
to increased patient volume, primarily in the areas of pediatrics and medicine.
Federal grants and contracts decreased during the year by $1.0 million. Sponsored program awards funded by
the Department of Health and Human Services comprised the majority of the decrease in activity.
State grants and contracts increased during the past year with additional revenues of $1.1 million. This was
primarily the result of increased sponsored program activity.
Private grants and contracts increased significantly during 2009 with additional revenues of $5.3 million. The
increase was primarily due to increases in the Oklahoma City and Tulsa residency programs. In addition,
professional services contractual activity rose within the College of Medicine.
Sales and services of auxiliary enterprises had a large increase in revenues during 2009 – approximately 22%.
This was primarily due to the first full year of revenues generated by the University Health Club and Medical
Office Building. Additionally, there was a significant increase in sales of network equipment and cabling for
the OU Physicians’ Building.
Operating Expenses
Significant changes in operating expenses were the result of the following:
2010
Compensation and benefits expense increased 5% or $26.0 million during fiscal year 2010. The increase was
attributable to increased professional practice plan supplementation payments and higher benefit costs.
Operating Revenues (in millions)
2010 2009 2008
Tuition and Fees $ 56.9 $ 55.9 $ 48.5
Patient Care 278.9 267.6 243.9
Grants and Contracts 231.9 222.6 217.2
Sales and Services of Educational Activities 1.5 1.4 1.6
Auxiliary Enterprises 18.1 19.4 17.1
Other 37.7 33.7 33.4
Total Operating Revenues $ 625.0 $ 600.6 $ 561.7
v
Operating Expenses--Continued
Contractual services expense decreased approximately $4.7 million during the past year. The decrease was
due in part to a reduction in subrecipient activity for various grants during fiscal year 2010, a reduction in
licenses and permits, and the termination of an OB/GYN contract with the Variety Health Center.
Supplies and materials expense was basically flat for the year showing an increase of only $.2 million.
Depreciation expense increased 8% or $1.5 million. The increase was due to an overall increase in the capital
asset base.
Utilities expense decreased 10% or $1.5 million during fiscal year 2010. This was primarily due to market
driven decreases in the prices of electricity, natural gas and water.
Other expenses increased 21% or $14.3 million during the year. This was primarily due to an increase in bad
debt expense for clinical accounts receivable.
2009
Compensation and benefits expense increased 4% or $20.2 million during fiscal year 2009. The increase was
attributable to a campus-wide salary program, higher benefit costs and an increase in full time equivalent
(FTE) positions.
Contractual services expense increased 11% or $6.6 million. The majority of the additional expense occurred
in professional services and was primarily related to increased contractual activity in the College of Medicine.
Supplies and materials expense increased 8% or $4.2 million. The increase was largely due to a rise in
prescription drug costs for resale by the College of Pharmacy. In addition, the cost of chemotherapy drugs in
Oncology continued to increase.
Depreciation expense increased 6% or $1.1 million. The increase was due to an overall increase in the capital
asset base.
Utilities expense increased 6% or $.8 million during fiscal year 2009. This was primarily due to market driven
increases in the prices of electricity incurred during the year, and expanded services provided to the new
College of Allied Health and OU Children’s Physicians Buildings.
Other expenses decreased 10% or $7.7 million during the year. This was largely due to the result of fewer
payments made to the Oklahoma Health Care Authority for graduate medical education, a decrease in the
purchase of expendable equipment, and a decrease in bad debt expense for clinical accounts receivable.
vi
Operating Expenses--Continued
The following summarizes the Center’s operating expenses for the periods ended June 30:
Operating E xpenses (in millions)
2010 2009 2008
Compensation and Be nefits $ 509.8 $ 483.8 $ 463.6
Contractual Se rvices 60.7 65.4 58.8
Supplie s and M aterials 57.9 57.7 53.5
Depre ciation 20.3 18.8 17.7
Utilities 12.0 13.5 12.7
Communications 6.0 6.1 6.2
Scholarships 2.4 2.9 2.8
Other 81.9 67.6 75.3
Total Operat ing Expens es $ 751.0 $ 715.8 $ 690.6
Nonoperating Revenues and Expenses
Significant changes in nonoperating revenues and expenses were the result of the following:
2010
State appropriations decreased 8% or $8.1 million in fiscal year 2010. This was due to a decrease in state
appropriations to higher education and other state agencies as the result of a shortfall in general revenues.
State payments from federal ARRA revenue of $8.2 million was received during the fiscal year offsetting the
reduction in state appropriations.
On-behalf payments decreased 12% or $1.4 million during the year. This was due to decreased payments
made by the State to the Teachers Retirement System.
Private gifts increased 28% or $2 million for the year.
Interest on indebtedness increased 81% or $2.3 million in fiscal year 2010. The increase was primarily due to
interest payments made on debt associated with the OU Cancer Center.
Investment income increased approximately 243% or $9.1 million during fiscal year 2010. The increase was
due to higher market values in the endowed investments which resulted in higher amounts of investment
income earned.
Endowment income decreased 23% or $2.5 million for the year.
2009
State appropriations increased 2% or $2.1 million in fiscal year 2009.
On-behalf payments decreased 5% or $.6 million during the year. This was due to decreased payments made
by the State to the Teachers Retirement System.
vii
Nonoperating Revenues and Expenses--Continued
Private gifts increased 42% or $2.1 million for the year.
Interest on indebtedness increased 24% or $.5 million in fiscal year 2009.
Investment income decreased 56% or $4.8 million during fiscal year 2009. The decrease was due to reduced
market values in the endowed investments which resulted in lower amounts of investment income earned.
Endowment income increased 11% or $1.1 million for the year.
The following summarizes the Center’s nonoperating revenues and expenses for the periods ended June 30:
Nonoperating Revenues and Expenses (in millions)
2010 2009 2008
State Appropriations $ 96.4 $ 104.5 $ 102.3
State Payments from Federal ARRA Revenue 8.2 0.0 0.0
On-behalf Payments 10.1 11.5 12.1
Private Gifts 9.1 7.1 5.0
Interest on Indebtedness (5.1) (2.8) (2.2)
Investment Income 12.8 3.7 8.5
Endowment Income 8.5 11.0 9.9
Net Nonoperating Revenue $ 140.0 $ 135.0 $ 135.6
The Statement of Cash Flows
The primary purpose of the Statement of Cash Flows is to provide information about the cash receipts and
disbursements of an entity during a period. This statement also aids in the assessment of an entity’s ability to
generate future net cash flows, ability to meet obligations as they come due, and needs for external financing.
2010
The Center’s overall liquidity improved during the year, with a net increase to cash of $48.9 million. Cash
used by operating activities decreased approximately $3.8 million over the prior year. This was due to higher
overall revenues more than offsetting increased compensation and benefit costs. Lower contractual services
and other operating costs also had a positive impact on cash used by operating activities for the year.
Significant cash flow increases occurred related to changes in private grant and contract revenues ($10.1
million), patient revenues ($9.5 million), state grants and contracts revenues ($4.9 million), other additions
($4.2 million), and sales and services of auxiliary operations ($1.1 million). Lower cash flows were
experienced in federal grants and contracts revenues ($1.1 million) and steam and chilled water plant revenues
($1 million). Cash flows from State payments from federal ARRA revenue ($8.2 million) offset a decrease in
state appropriations ($8.1 million). Cash flow increases from endowment income ($2.1 million) and private
gifts ($1.7 million) contributed to an overall net increase of approximately $3.8 million in cash flows provided
from non-capital and related financing activities. Cash flows associated with capital and related financing
activities decreased by $70.5 million. An increase in state school land funds ($1 million), private gifts for
viii
The Statement of Cash Flows—Continued
capital projects ($.8 million), endowment gifts ($.2 million), and a decrease in purchases of capital assets ($.5
million) during the year was more than offset by decreased proceeds from bonds payable ($38.9 million), state
grants and contracts for capital projects ($25.6 million), federal grants and contracts for capital projects ($3.7
million), and state appropriations for capital projects ($2 million). Increases in principal paid on debt and
capital leases ($2.5 million) and interest paid on debt and capital leases ($.3 million) negatively impacted the
overall cash use during the year. A decrease in cash flows on the purchase of investments, a decrease in
proceeds from sales and maturities of investments, and a decrease in investment income resulted in an overall
cash decrease from investing activities of approximately $26.7 million.
2009
The Center’s overall liquidity improved during the year, with a net increase to cash of $138.4 million. Cash
used by operating activities increased approximately $5 million over the prior year. This was due to increased
compensation, benefit, contractual services and other operating costs more than offsetting higher overall
revenues. Significant increases in revenues occurred in patient revenues ($24.7 million), tuition and fees
($10.6 million), private grant and contract revenues ($8.1 million), and sales and services of auxiliary
operations ($1.4 million). Lower revenues were experienced in state grants and contracts revenues ($10.5
million) and federal grants and contracts revenues ($5.4 million). State appropriations and private gifts each
rose by approximately $2.1 million, contributing to an overall net increase of approximately $4.3 million in
cash flows provided from non-capital and related financing activities. Cash provided by capital and related
financing activities increased by $73.3 million. An increase in proceeds from bonds payable ($70.4 million),
state grants and contracts for capital projects ($26.5 million), and federal grants and contracts for capital
projects ($2.4 million) during the year more than offset decreased state appropriations for capital projects
revenues ($19.2 million), decreased private gifts for capital projects ($4 million), and endowment gifts ($.4
million). Increases in purchases of capital assets ($1.8 million), principal paid on debt and capital leases ($.5
million) and interest paid on debt and capital leases ($.5 million) negatively impacted the overall cash use
during the year. A decrease in the purchase of investments, an increase in proceeds from sales and maturities
of investments, and an increase in investment income resulted in an overall cash increase from investing
activities of approximately $40 million.
The following summarizes the Center’s cash flows for the periods ended June 30:
Cash Flows for the Year (in millions)
2010 2009 2008
Cash Provided (used) by:
Operating $ (59.7) $ (77.3) $ (72.3)
Noncapital Financing Activities 124.5 120.7 116.4
Capital and Related Financing Activities (51.3) 32.9 (40.4)
Investing Activities 35.4 62.1 21.7
Net Increase in Cash $ 48.9 $ 138.4 $ 25.4
Cash, Beginning of the year $ 370.9 $ 232.5 $ 207.1
Cash, End of the year $ 419.8 $ 370.9 $ 232.5
ix
Capital Asset and Debt Administration
Capital Assets
2010
At June 30, 2010, the Center had approximately $450.2 million invested in capital assets, net of accumulated
depreciation of $192.4 million. Depreciation charges for the current year totaled $20.3 million compared to
$18.8 million in the prior year.
2009
At June 30, 2009, the Center had approximately $394 million invested in capital assets, net of accumulated
depreciation of $175 million. Depreciation charges for the current year totaled $18.8 million compared to
$17.7 million in the prior year.
Major capital project in progress during 2010 included construction of the OU Cancer Institute and
Schusterman Center Library. Additional capital projects initiated during 2010 included improvements to the
Steam and Chilled Water Plant and repairs to the Stonewall Parking Garage. Funding for these projects
included private gifts, state appropriations, revenue bonds and other institutional funds.
The Center has approximately $108 million in capital projects planned for the fiscal year ending June 30,
2011. Major projects include continuing construction of the OU Cancer Institute, upgrades to the Steam and
Chilled Water Plant, and repairs to the Stonewall Parking Garage. Construction is scheduled to begin on the
Enterprise Tier 2 Data Center, Schusterman Center Library, and OU Wayman Tisdale Specialty Health
Center. A remodel of the first floor of the O’Donoghue Building for Geriatric Medicine is also planned.
Work is anticipated to be completed on the Schusterman Center Library.
2010 2009 2008
Land and Infrastructure $ 30.7 $ 31.2 $ 32.2
Buildings 371.0 316.1 257.9
Furniture, Fixtures, and Equipment 41.6 39.8 39.3
Library Materials 6.9 6.8 6.6
Totals $ 450.2 $ 393.9 $ 336.0
Capital Assets, Net, at Year-End (in millions)
x
Debt
2010
At fiscal year-end 2010, the Center had approximately $148 million in outstanding debt, an increase of $25.6
million over the prior year.
The Center entered into one new long term general obligation bond financing arrangement during the current
year totaling $31.6 million. This provided funds to refund certain prior bonds, and to construct, renovate,
remodel, expand and equip certain additions and improvements to parking, utility, and data center facilities on
the Center’s Oklahoma City campus. This also provided funds to advance refund the majority of the series
2001 Student Center revenue bonds. Debt repayments of $6.3 million were made. More detailed
information related to the Center’s long-term liabilities is presented in Note 10 to the financial statements.
2009
At fiscal year-end 2009, the Center had approximately $122.3 million in outstanding debt, an increase of $67
million over the prior year.
The Center entered into one new long term revenue bond financing arrangement during the current year
totaling $70.4 million. This provided the majority of funding for the construction of the OU Cancer Center
on the Oklahoma City campus. Debt repayments of $3.8 million were made. More detailed information
related to the Center’s long-term liabilities is presented in Note 10 to the financial statements.
The following summarizes outstanding debt by type as of June 30:
2010 2009 2008
General Revenue Bonds $ 69.6 $ 69.6 $ 0.0
General Obligation Bonds 31.5 0.0 0.0
Auxiliary Facility Revenue Bonds 11.9 16.4 17.5
Lease Obligations 31.9 32.9 34.3
Notes Payable 3.1 3.4 3.9
Totals $ 148.0 $ 122.3 $ 55.7
Outstanding Debt, at Year-End (in millions)
Economic Outlook
The Center’s economic position is closely related to its role as the state’s primary facility for the training of
healthcare professionals. Future successes are largely dependent upon the ability to recruit and retain highly
qualified students, faculty, and staff, as well as, ongoing financial and political support from state government.
While support from state leadership remains steady, a shortfall in the State’s general revenue resulted in a
1.77% decrease in state appropriations for fiscal year 2011. This includes an offset from State Fiscal
Stabilization Funds under the American Recovery and Reinvestment Act of 2009. Fiscal year 2011 general
xi
Economic Outlook—Continued
revenues are currently meeting state budget projections; however recovery to pre-recession funding levels is
expected to take a number of years.
Despite the downturn in the State’s economy, the Center is well positioned financially to continue its service
to students, patients, the research community, and the citizens of Oklahoma. The professional practice plans
continue to contribute significantly to the Center’s financial performance and are anticipated to remain stable.
In addition, the center expects continued support from private funding and federal grants and contracts.
Audit  Tax  Advisory
Grant Thornton LLP
211 N Robinson, Suite 1200N
Oklahoma City, OK 73102-7148
T 405.218.2800
F 405.218.2801
www.GrantThornton.com
Report of Independent Certified Public Accountants
Board of Regents of the University of Oklahoma
University of Oklahoma Health Sciences Center
Norman, Oklahoma
We have audited the accompanying statements of net assets of the University of Oklahoma
Health Sciences Center (the “Center”) as of June 30, 2010 and 2009, and the related statements
of revenues, expenses and changes in net assets and cash flows for the years then ended. These
financial statements are the responsibility of the Center’s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United
States of America as established by the American Institute of Certified Public Accountants and
the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Center’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in all material respects,
the financial position of the Center as of June 30, 2010 and 2009 and the changes in its net assets
and its cash flows for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated October
8, 2010 on our consideration of the Center’s internal control over financial reporting and on
our tests of its compliance with certain provisions of laws, regulations, contracts and grant
agreements and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that
testing, and not to provide an opinion on the effectiveness of the Center’s internal control over
financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards and should be considered in assessing results of
our audits.
Management’s discussion and analysis and the required supplementary information (schedule
of funding progress, schedule of employer contributions and notes to required supplementary
information) as listed in the table of contents are not a required part of the basic financial
statements but are supplementary information required by accounting principles generally
accepted in the United States of America. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of measurement and
presentation of the required supplementary information. However, we did not audit the
information and express no opinion on it.
Oklahoma City, Oklahoma
October 8, 2010
UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
STATEMENTS OF NET ASSETS
June 30,
Assets 2010 2009
Current Assets
Cash and cash equivalents $ 356,728 $ 292,323
Restricted cash and cash equivalents 58,795 73,946
Short term investments 10,024 10,147
Accrued interest receivable 136 480
Accounts receivable, net of allowances 99,749 105,037
Inventories and supplies 1,487 1,456
Loans to students, net of allowance for uncollectible loans 956 1,001
Deposits and prepaid expenses 711 1,046
Total current assets 528,586 485,436
Noncurrent Assets
Restricted cash and cash equivalents 4,226 4,592
Endowment investments 35,178 32,522
Other long-term investments 5,026 30,322
Pledges receivable - 3,397
Investments in real estate 175 175
Loans to students, net 5,722 5,500
Deposits and prepaid expenses 799 788
Capital assets, net 450,217 393,869
Total noncurrent assets 501,343 471,165
TOTAL ASSETS 1,029,929 956,601
Liabilities
Current Liabilities
Accounts payable and accrued expenses 44,647 43,990
Deferred revenue 3,634 324
Accrued interest payable 2,214 246
Deposits held in custody for others 6,355 6,762
Long-term liabilities, current portion
Accrued compensated absences 23,248 22,969
Post employment benefits obligation 3,427 2,510
Capital lease payable 1,691 1,400
Notes payable 734 520
Revenue bonds payable 6,511 2,345
Total current liabilities 92,461 81,066
Noncurrent Liabilities
Accrued compensated absences 5,453 5,042
Post employment benefits obligation 44,220 28,752
Federal loan program contributions refundable 6,725 6,646
Capital lease payable 30,198 31,587
Notes payable 2,339 2,880
Revenue bonds payable 106,483 83,592
Total noncurrent liabilities 195,418 158,499
TOTAL LIABILITIES 287,879 239,565
Net Assets
Invested in capital assets, net of related debt 302,359 272,693
Restricted for:
Nonexpendable 28,591 28,253
Expendable
Education and general 92,552 85,347
Capital projects 49,099 79,132
Debt service 15,157 7,390
Unrestricted 254,292 244,221
TOTAL NET ASSETS $ 742,050 $ 717,036
($'s in Thousands)
The accompanying notes are an integral part of these financial statements.
5
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
For the year ended June 30,
2010 2009
Operating Revenues
Student tuition and fees (net of scholarship allowances of $3,131
and $3,585 for 2010 and 2009, respectively) $ 56,923 $ 55,848
Patient care (net of provisions for contractual and other adjustments of $379,346
and $317,090 for 2010 and 2009, respectively) 278,877 267,656
Federal grants and contracts 80,617 78,456
State grants and contracts 67,733 68,004
Private grants and contracts 83,512 76,168
Sales and services of educational activities 1,469 1,399
Sales and services of auxiliary enterprises
Steam and chilled water plant revenues
(revenues are pledged as security for the Utility System
Revenue Bonds Series 1998A and 2004) 5,977 6,756
Other (including $65 and $75 from Student Center Revenues for 2010 and 2009 respectively) 12,081 12,621
Other revenues (including $190 and $198 from interest on student loans for 2010 and 2009 respectively) 37,697 33,654
Total Operating Revenues 624,886 600,562
Operating Expenses
Compensation and benefits 509,745 483,847
Contractual services 60,700 65,383
Supplies and materials 57,861 57,714
Depreciation 20,274 18,808
Utilities 12,044 13,436
Communication 5,990 6,136
Scholarships 2,425 2,898
Other 81,933 67,605
Total Operating Expenses 750,972 715,827
Operating Loss (126,086) (115,265)
Nonoperating Revenues and Expenses
State Appropriations 96,371 104,457
State payments from federal ARRA revenue 8,153 -
On-behalf payments 10,090 11,468
Private gifts 9,091 7,130
Interest on indebtedness (5,073) (2,808)
Net investment income 12,765 3,721
Endowment income 8,518 11,049
Net Nonoperating Revenues 139,915 135,017
Income before other revenues, expenses, gains or losses 13,829 19,752
Other Revenue Expenses, Gains or Losses
Federal grants and contracts for capital projects - 3,450
State grants and contracts for capital projects 387 9,817
State appropriations for capital projects 6,466 9,854
Private gifts for capital projects 1,614 5,908
State school land funds 2,754 1,775
Additions to permanent endowments 451 235
Unrealized (loss) gain on investments (487) 903
Change in Net Assets 25,014 51,694
Net assets - beginning of year 717,036 665,342
Net assets - end of year $ 742,050 $ 717,036
($'s in Thousands)
The accompanying notes are an integral part of these financial statements.
6
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
STATEMENTS OF CASH FLOWS
For the Year Ended June 30,
2010 2009
Cash Flows from Operating Activities:
Tuition and fees $ 56,462 $ 56,100
Patient revenues 251,954 242,466
Sales and services of auxiliary enterprises 12,899 11,784
Sales and services of educational activities 1,569 1,573
Steam and Chilled Water Plant revenues 5,990 6,935
Student Center revenues 65 75
Federal grants and contracts 76,060 77,199
State grants and contracts 66,662 61,715
Private grants and contracts 86,471 76,419
Interest on loans receivable 190 198
Other additions 37,620 33,458
Loans issued to students (1,028) (742)
Collection of loans 842 933
Compensation and benefits (482,009) (455,620)
Contractual services (58,716) (64,951)
Supplies and materials, utilities, communications,
scholarships and fellowships, other, and deposits held in custody (128,528) (124,850)
Net cash flows used by operating activities (73,497) (77,308)
Cash Flows from Noncapital and Related Financing Activities:
State appropriations 96,371 104,457
State payments from federal ARRA revenue 8,153 -
Endowment income 11,055 8,983
Private gifts 8,838 7,130
Federal Family Education Loan receipts 62,807 73,393
Federal Family Education Loan disbursements (62,807) (73,393)
Net decrease to Federal loan program contributions refundable 79 83
Net cash flows provided by noncapital and related financing activities 124,496 120,653
Cash Flows from Capital and Related Financing Activities:
Proceeds from bonds payable 31,552 70,407
State grants and contracts for capital projects 1,456 27,097
State appropriations for capital projects 8,354 10,374
Federal grants and contracts for capital projects - 3,700
Private gifts for capital projects 4,297 3,546
Purchases of capital assets (78,615) (79,144)
Principal paid on capital debt and lease (6,305) (3,830)
Interest paid on capital debt and lease (1,440) (1,176)
Endowment gifts 451 235
State school land funds 2,754 1,775
Net cash (used in) provided by capital and related financing activities (37,496) 32,984
Cash Flows from Investing Activities:
Investment income 9,898 11,109
Proceeds from sales and maturities of investments 25,724 68,037
Purchase of investments (237) (17,082)
Net cash flows provided by investing activities 35,385 62,064
Net increase in cash and cash equivalents 48,888 138,393
Cash and cash equivalents - beginning of year 370,861 232,468
Cash and cash equivalents - end of year $ 419,749 $ 370,861
($'s in Thousands)
The accompanying notes are an integral part of theses financial statements.
7
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
STATEMENTS OF CASH FLOWS - CONTINUED
For the year ended June 30,
2010 2009
RECONCILIATION
Operating loss $ (126,086) $ (115,265)
Depreciation expense 20,274 18,808
Loss on disposal of fixed assets 2,333 2,461
OTRS on-behalf contribution 8,470 9,848
Change in current assets and liabilities:
Accounts receivable (does not include endowment) 761 (21,159)
Inventories and supplies (31) (684)
Loans to students (177) 181
Deposits and prepaid expenses 324 1,086
Accounts payable and accrued expenses 657 4,568
Deferred revenue 3,310 50
Compensated absences 690 1,740
Post employment benefits obligation 16,385 15,493
Deposits held in custody for others (407) 5,565
Net cash flows used by operating activities $ (73,497) $ (77,308)
SUPPLEMENTAL CASH FLOW INFORMATION
Assets acquired via capital lease $ 339 $ -
Capitalization of interest $ 1,129 $ 2,412
Unrealized (loss) gain on investments $ (487) $ 903
RECONCILIATION OF CASH AND CASH EQUIVALENTS
TO THE STATEMENT OF NET ASSETS
Current Assets
Cash and cash equivalents $ 356,728 $ 292,323
Restricted cash and cash equivalents 58,795 73,946
Noncurrent assets
Restricted cash and cash equivalents 4,226 4,592
$ 419,749 $ 370,861
($'s in Thousands)
The accompanying notes are an integral part of these statements.
8
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS
June 30, 2010 and 2009
($ in thousands)
9
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Reporting Entity: The financial reporting entity, as defined by Governmental Accounting
Standards Board (“GASB”) Statement No. 14, The Financial Reporting Entity, and as amended by GASB
Statement No. 39, Determining Whether Certain Organizations Are Component Units, consists of the primary
government, organizations for which the primary government is financially accountable and other organizations
for which the nature and significance of their relationship with the primary government are such that exclusion
could cause the financial statements to be misleading or incomplete.
The University of Oklahoma Health Sciences Center (the “Center”) is an agency of the State of Oklahoma
governed by The Board of Regents of the University of Oklahoma (the “Board”) and the Oklahoma State
Regents for Higher Education (the “State Regents”). The Center is a separate operational unit of the University
of Oklahoma, which is a component unit of the State of Oklahoma, and is included in the financial statements
of the State of Oklahoma as part of the Higher Education component unit. The Center consists of seven
academic colleges, including the Colleges of Medicine, Public Health, Allied Health, Dentistry, Nursing,
Pharmacy and the Graduate College. These financial statements do not include the operations of the University
of Oklahoma Norman Campus (the “Norman Campus”), Cameron University or Rogers State University,
which are distinct operational entities that prepare separate financial statements for the Board. Each entity
receives separate state appropriations and prepares separate budgets. These entities are managed as separate
component units of the State of Oklahoma higher education component and supported in large part by separate
systems and management personnel.
The University of Oklahoma Foundation, Inc. (the “OU Foundation”) is an Oklahoma not-for-profit
organization organized for the purpose of receiving and administering gifts intended for the benefit of the
University of Oklahoma as a whole, including both the Norman Campus and the Center. Accordingly, the
resources received and held by the OU Foundation are not entirely or almost entirely held for the benefit of the
Center. As a result, the OU Foundation is not considered a component unit of the Center under the definition
of GASB Statement No. 39.
Faculty members in the Colleges of Medicine, Public Health, Allied Health, Dentistry, Nursing and Pharmacy
may participate in Professional Practice Plans (PPP’s). Faculty who participate in a PPP are primarily
committed to the academic and research programs of the Center; however, they also engage in professional
practice activities related to patient care and services. A significant portion of PPP revenue is generated from
patient care services provided to patients through the OU Medical Center. The OU Medical Center includes
Presbyterian Hospital, University Hospital and Children’s Hospital of Oklahoma, all located in Oklahoma City.
The financial position and operations of the PPP’s are included in the accompanying financial statements of the
Center.
Financial Statement Presentation: The Center’s financial statements are presented in accordance with the
requirements of GASB Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State
and Local Governments, and GASB Statement No. 35, Basic Financial Statements and Management’s Discussion and
Analysis for Public Colleges and Universities. Under GASB Statements No. 34 and No. 35, the Center is required to
present a statement of net assets classified between current and noncurrent assets and liabilities, a statement of
revenues, expenses and changes in net assets, with separate presentation for operating and nonoperating
revenues and expenses and a statement of cash flows using the direct method.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
10
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Basis of Accounting: For financial reporting purposes, the Center is considered a special-purpose government
engaged only in business-type activities. Accordingly, the Center’s financial statements have been presented
using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis,
revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All
intra-agency transactions have been eliminated.
The Center has the option to apply all Financial Accounting Standards Board (“FASB”) pronouncements issued
after November 30, 1989, unless FASB conflicts with GASB. The Center has elected to not apply FASB
pronouncements issued after the applicable date.
Cash Equivalents: For purposes of the statements of cash flows, the Center considers all highly liquid
investments with an original maturity of three months or less to be cash equivalents. Funds invested through
the State Treasurer’s Cash Management Program are considered cash equivalents. Cash equivalents are fully
collateralized by obligations of the U.S. government or its agencies or insured by federal deposit insurance.
Deposits and Investments: The Center accounts for its investments at fair value, as determined by quoted
market prices, in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments
and for External Investment Pools. In accordance with GASB Statement No. 40, Deposit and Investment Risk
Disclosures, an Amendment of GASB Statement No. 3, the Center has disclosed its deposit and investment policies
related to the risks identified in GASB Statement No. 40. Changes in unrealized gain (loss) on the carrying
value of the investments are separately reported in the statements of revenues, expenses and changes in net
assets.
Accounts Receivable: Accounts receivable consist of tuition and fee charges to students and auxiliary enterprise
services provided to students, faculty and staff. Accounts receivable also include amounts due from the federal,
state and local governments, and private sources, in connection with reimbursement of allowable expenditures
made pursuant to the Center’s grants and contracts, construction projects and unspent proceeds from capital
leases. Additionally, a significant portion of the accounts receivable is comprised of amounts due for services
provided through the PPP’s and clinics. Accounts receivable are recorded net of contractual adjustments and
estimated uncollectible amounts.
The Center determines its allowances by considering a number of factors, including the length of time accounts
receivable are past due and the Center’s previous loss history (including historical payment trends by payor for
PPP receivable balances), which is indirectly impacted by the condition of the general economy and the industry
as a whole. The Center writes off specific accounts receivable when they become uncollectible, and payments
subsequently received on such receivables are credited to the allowance for doubtful accounts.
Medical Malpractice Coverage Claims: The Center is covered for medical malpractice risks under a medical
malpractice insurance policy (See Note 16). The Center pays a fixed premium for coverage of malpractice
claims the Center might potentially incur.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
11
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Inventories: Inventories, consisting of merchandise for resale and supplies, are stated at the lower of aggregate
cost or aggregate market. Cost is determined for the various types of inventory using the first-in, first-out and
average cost methods, as deemed appropriate.
Restricted Cash and Investments: Cash and investments that is externally restricted to make debt service
payments maintain sinking or reserve funds, or to purchase capital or other noncurrent assets, are classified as
restricted in the statements of net assets.
Capital Assets: Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of
donation in the case of gifts. The Center’s capitalization policy for furniture, fixtures and equipment, includes
all items with a unit cost of $5 or more and an estimated useful life of greater than one year. Renovations to
buildings, infrastructure and land improvements that significantly increase the value or extend the useful life of
the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in
which the expense was incurred.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally
50 years for buildings, 20 years for infrastructure, 10 years for land improvements, library materials, furniture,
fixtures and equipment and 5 years for vehicles, computers and computer accessories or the duration of the
lease term for capital leases.
Costs incurred during construction of long-lived assets are recorded as construction in progress and are not
depreciated until placed in service. The Center capitalizes interest as a component of capital assets constructed
for its own use. In 2010, total interest incurred was $6,202, of which $1,129 was capitalized. In 2009, total
interest incurred was $5,220, of which $2,412 was capitalized.
Intangible assets are reported with capital assets. Intangible assets subject to amortization are amortized over
their respective estimated useful lives ranging from 5 to 15 years. Intangible assets with indefinite useful lives
are not material to the financial statements.
Capital assets are subject to an evaluation of possible impairment when events or circumstances indicate that the
related changes in carrying amounts may not be recoverable. If required, impairment losses are reported in the
statement of revenues, expenses and changes in net assets. There were no events or changes in conditions
requiring recognition of an impairment loss in either 2010 or 2009.
Deferred Revenues: Deferred revenues consist primarily of grant revenues for which the work on the grant has
not yet been completed. It also consists of prepaid patient revenues on long-term contracts received during the
year, but related to the subsequent accounting period, and amounts received for tuition and fees prior to the end
of the fiscal year but related to the subsequent accounting period.
Compensated Absences: Employees’ compensated absences are accrued when earned. The obligation at the
end of the year and expenditure incurred during the year are recorded as accrued compensated absences in the
statements of net assets, and as a component of compensation and benefit expense in the statements of
revenues, expenses and changes in net assets.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
12
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Noncurrent Liabilities: Noncurrent liabilities include (1) principal amounts of revenue bonds payable, notes
payable, and capital lease obligations with contractual maturities greater than one year; (2) federal loans liability;
and (3) amounts for accrued compensated absences and other liabilities that will not be paid within the next
fiscal year.
Net Assets: The Center’s net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the Center’s total investment in capital assets, net of
outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet
expended for capital assets, such amounts are not included as a component of invested in capital assets, net of
related debt.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type
funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the
principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present
and future income, which may either be expended or added to principal.
Restricted net assets - expendable: Expendable restricted net assets include resources in which the Center is legally
or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state
appropriations, and sales and services of educational departments and auxiliary enterprises. These resources
are used for transactions relating to the educational and general operations of the Center, and may be used at
the discretion of the governing board to meet current expenses for any purpose. These resources also include
auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty
and staff.
When an expense is incurred that can be paid using either restricted or unrestricted resources, the Center’s
policy is to first apply the expense towards restricted resources, and then towards unrestricted resources.
Classification of Revenues: The Center has classified its revenues as either operating or nonoperating revenues
according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions,
such as (1) student tuition and fees, net of scholarship allowances, (2) patient revenues, (3) sales and services
of educational activities, (4) sales and services of auxiliary enterprises, (5) most federal, state, and local grants
and contracts, and (6) interest on student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange
transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating
revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Government Entities
That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
13
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Scholarship Allowances: Student tuition and fee revenues, and certain other revenues from students, are
reported net of scholarship allowances in the statements of revenues, expenses and changes in net assets.
Scholarship allowances are the difference between the stated charge for goods and services provided by the
Center, and the amount that is paid by students and/or third parties making payments on the students’ behalf.
Certain governmental grants, such as Pell grants, and other federal, state or nongovernmental programs, are
recorded as either operating or nonoperating revenues in the Center’s financial statements. To the extent that
revenues from such programs are used to satisfy tuition and fees and other student charges, the Center has
recorded a scholarship allowance.
Tax Status: As a state institution of higher education, the income of the Center is exempt from federal and state
income taxes; however, income generated from activities unrelated to the exempt purpose is subject to income
tax under Internal Revenue Code Section 511 (a)(2)(B).
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect
certain reported amounts and disclosures; accordingly, actual results could differ from those estimates.
New Accounting Pronouncements: In March 2009, GASB issued Statement No. 54, Fund Balance Reporting and
Governmental Fund type Definitions. This Statement establishes fund balance classifications that comprise a
hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon
the use of the resources reported in governmental funds. This statement also provides for additional
classifications as restricted, committed, assigned, and unassigned based on the relative strength of the
constraints that control how specific amounts can be spent. GASB No. 54 is effective for the Center for the
fiscal year beginning July 1, 2010. Management does not believe that the Statement will have any effect on the
Center’s financial statements.
In June 2010, GASB issued Statement No. 59, Financial Instruments Omnibus. The objective of this statement is to
update and improve existing standards regarding financial reporting and disclosure requirements of certain
financial instruments and external investment pools. GASB No. 59 is effective for the Center for the fiscal year
beginning July 1, 2010. Management has not yet determined the effect, if any, of adoption of this statement on
the financial statements.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
14
NOTE 2 - DEPOSITS AND INVESTMENTS
Cash and Cash Equivalents: At June 30, 2010 and 2009, the carrying amounts of the Center’s deposits with the
State Treasurer and other financial institutions were:
June 30
2010 2009
Deposits with the State Treasurer $378,151 $361,510
U.S. financial institutions 32,714 7,714
Deposits with bond trustees 8,884 1,637
$419,749 $370,861
The Center’s deposits with the State Treasurer are pooled with the funds of other State Agencies and then, in
accordance with statutory limitations, placed in financial institutions or invested as the Treasurer may determine,
in the State’s name.
Investments: At June 30, the fair value of the Center’s investments consisted of the following:
2010 2009
U.S. Government securities $ 15,050 $ 40,469
Univ. of Oklahoma Norman Campus
Investment Pool 35,178 32,522
Real Property 175 175
$50,403 $73,166
Investments in the University of Oklahoma Norman Campus Investment Pool consist primarily of investments
in U.S. and International equity funds.
Disclosures for deposits and investments are presented according to GASB Statement No. 40, Deposit and
Investment Risk Disclosures (GASB 40). Accordingly, information regarding the various risk categories for the
Center’s deposits and investments and the policies for managing that risk are included below:
Credit Risk: Credit risk is the risk that the issuer or other counterparty to an investment will not fulfill its
obligation, causing the Center to experience a loss of principal. As a means of limiting exposure to losses arising
from credit risk, the Center limits its exposure to this risk as follows:
 State law limits investments in obligations of state and local governments to the highest rating from at
least one nationally recognized rating agency acceptable to the State Treasurer.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
15
NOTE 2 - DEPOSITS AND INVESTMENTS - CONTINUED
 Short-term investments managed by the Center are generally limited to direct obligations of the United
States Government and its agencies, certificates of deposit and demand deposits.
 The Board has authorized endowment and similar funds to be invested in direct obligations of the
United States Government and its agencies, certificates of deposit, prime commercial paper, bankers
acceptances, demand deposits, corporate debt (no bond below a single A rating by Moody’s Investors
Service or Standard & Poor’s Corporation may be purchased), convertible securities and equity
securities.
 The Center’s fixed income securities are generally limited to holdings of high quality fixed income
securities. As of June 30, 2010 and 2009, the Center’s investment in fixed income securities has a credit
rating of at least BBB as rated by Standard & Poors Corporation.
Custodial Credit Risk: Custodial credit risk is the risk that, in the event of the failure of a depository institution,
the Center will not be able to recover deposits or will not be able to recover collateral securities in the
possession of an outside party. For investments, custodial credit risk is the risk that, in the event of failure of
the counterparty to a transaction, the Center will not be able to recover the value of investment or collateral
securities in the possession of an outside party. As a means of limiting its exposure to losses arising from
custodial credit risk, the Center’s deposit and investment policies limit the exposure to this risk as follows:
 All funds and deposits with the State Treasurer must be fully insured by Federal Deposit Insurance or
collateralized by securities held by the cognizant Federal Reserve Bank.
 All funds on deposit with financial institutions, including trustees related to the Center’s bond indenture
and capital lease agreements, are insured by Federal Deposit Insurance or collateralized by securities
held by the cognizant Federal Reserve Bank, or invested in U.S. Government obligations, in the
Center’s name.
 Investment securities held in bond debt service reserve funds are held by the respective bond trustee
for the benefit of the Center and bondholders.
 Endowment investments are pooled with the University of Oklahoma Norman Campus (“the
University”) and held in the University’s name.
Concentration of Credit Risk: Center investments can be exposed to a concentration of credit risk if significant
amounts are invested in any one issuer. The Center has imposed a limit on the amount the Center may invest in
any one issuer. The majority of the investments are in fixed income funds and investments guaranteed by the
U.S. Government.
Interest Rate Risk: The Center has a formal policy that limits investment maturities as a means of managing its
exposure to fair value losses arising from increasing interest rates. The Center is responsible for determining its
operating cash flow requirements and to insure that adequate funds are available to maintain the Center’s
operations. In determining liquidity needs, the appropriate mix of short-term, intermediate, and long-term
investments will be evaluated. The Center’s investments are categorized by maturity dates to reflect the fair
values that are sensitive to changes in interest rates.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
16
NOTE 2 - DEPOSITS AND INVESTMENTS - CONTINUED
Investment maturities were as follows at June 30, 2010:
Investment Maturities (in Years)
Fair Not Less One to Six to More
Investment Type Value Applicable Than One Five Ten Than Ten
U.S. Government securities $15,050 $ - $10,024 $5,026 $ - $ -
Univ. of Oklahoma Norman
Campus Investment Pool 35,178 35,178 - - - -
Real Property 175 175 - - - -
$50,403 $ 35,353 $10,024 $ 5,026 $ - $ -
Title 70, Section 4306 of the Oklahoma Statutes directs, authorizes, and empowers the Center’s Board of
Regents to hold, invest or sell donor restricted endowments in a manner which is consistent with the terms of
the gift as stipulated by the donor and with the provision of any applicable laws.
The Center has entrusted the University of Oklahoma Norman Campus with a portion of their funds totaling
$35,354 and $32,698 for 2010 and 2009, of which $32,466 and $29,915 are endowment funds. These funds are
held in the Regent’s Fund investments on behalf of the Center.
The reconciliation between investments per the statements of net assets and total investments is as follows at
June 30:
2010 2009
Investments per Statement of Net Assets
Short-term investments $ 10,024 $ 10,147
Endowment investments 35,178 32,522
Other long-term investments 5,026 30,322
Investments in real estate and mineral interests 175 175
Total Investments per Statement of Net Assets $ 50,403 $ 73,166
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
17
NOTE 3 -ACCOUNTS RECEIVABLE
Accounts receivable are shown net of contractual allowances and doubtful accounts in the accompanying
statements of net assets. At June 30, the accounts receivable and allowances are as follows:
2010 2009
Accounts receivable $ 157,607 $ 164,386
Less allowance and contractual adjustments (57,858) (59,349)
Accounts receivable, net $ 99,749 $ 105,037
The following is a breakdown of the June 30 accounts receivable balances:
2010 2009
Auxiliary enterprises
Accounts receivable $ 3,874 $ 4,537
Less allowance (109) (128)
Accounts receivable, net $ 3,765 $ 4,409
PPP patient billings
Accounts receivable $ 101,477 $ 110,567
Less contractual adjustments (52,473) (55,892)
Less allowance (5,276) (3,328)
Accounts receivable, net $ 43,728 $ 51,347
Due from Federal, State, and private grants
Accounts receivable, no allowance $ 49,707 $ 47,194
Student tuition and fees
Accounts receivable, no allowance $ 2,549 $ 2,087
NOTE 4 – NET PATIENT SERVICE REVENUE
The Center has agreements with third-party payors that provide for payments to the Center at amounts
different from its established rates. A summary of the payment arrangements with major third-party payors
follows:
Medicare Inpatient acute care and outpatient services rendered to Medicare program beneficiaries are paid at
prospectively determined rates that vary accordingly to the Current Procedural Terminology (CPT) code billed
by the provider. These codes are established by the American Medical Association and are adopted for use by
the Center for Medicaid and Medicare Services (CMS) as a basis for their provider reimbursement methodology.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
18
NOTE 4 – NET PATIENT SERVICE REVENUE - CONTINUED
Medicaid Inpatient and outpatient services rendered to Medicaid program beneficiaries are reimbursed at a
prospectively determined per diem rate or established fee.
Workers’ Compensation Inpatient and outpatient services rendered under workers’ compensation are reimbursed
according to the State of Oklahoma fee schedule or at a predetermined discount from the State of Oklahoma
fee schedule.
Other Carriers The Center has also entered into payment agreements with certain commercial insurance
carriers, health maintenance organizations and preferred provider organizations. The basis for payment under
these agreements includes prospectively determined rates and discounts from established charges.
NOTE 5 – INVENTORY
Inventories consisted of the following at June 30:
2010 2009
Site support $ 216 $ 219
Telecommunications 331 452
Other service units 136 139
Dental supply store 150 146
Other auxiliaries 7 8
Pharmacies 647 492
$ 1,487 $ 1,456
NOTE 6 - LOANS TO STUDENTS
The Center had student loans outstanding of $6,678 and $6,501 (net of allowance for uncollectible loans of $351
and $342) at June 30, 2010 and 2009, respectively. Student loans made under the Health Professions Student
Loan Program and the Nursing Student Loan Program represented approximately $6,582 and $6,372 of these
amounts. Under these programs, the U.S. Department of Health and Human Services, Bureau of Health
Professions, provides funds for eight-ninths (8/9) of the loans, and the Center provides the remaining funds.
At June 30, 2010 and 2009, $6,724 and $6,646, respectively, are included as federal loan program contributions
refundable in the statements of net assets as these amounts are refundable to the U.S. government upon
cessation of the programs.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
19
NOTE 7 - FUNDS HELD IN TRUST BY OTHERS
The University of Oklahoma (the “University”) has a beneficial interest in the “Section Thirteen State
Educational Institutions Fund” and the “New College Fund” held in the care of the Commissioners of the Land
Office as trustees. The University has the right to receive annually 30% of the distribution of income produced
by “Section Thirteen State Educational Institutions Fund” assets and 100% of the distribution of income
produced by the University’s “New College Fund”.
The University, as a whole, received $10,125 and $6,550 during the years ended June 30, 2010 and 2009,
respectively, which is restricted to acquisition of buildings, equipment or other capital items. Of these amounts,
the Center received approximately $2,753 and $1,775 in 2010 and 2009, respectively. Present state law prohibits
the distribution of any corpus of these funds. The estimated fair value of the total trust fund for the University,
held in trust by the Commissioners of the Land Office, was approximately $127,608 ($123,985 restricted corpus)
and $110,073 ($113,058 restricted corpus) at June 30, 2010 and 2009, respectively. Such trust funds, held by the
Commissioners of the Land Office, have not been reflected in the accompanying financial statements.
In connection with the State Regents’ Endowment Program, the State of Oklahoma has matched contributions
received under the program. The cumulative match amount, plus any retained accumulated earnings, totaled
$97,513 and $95,631 at June 30, 2010 and 2009, respectively, and is invested by the State Regents on behalf of
the Center. The Center will receive an annual distribution of earnings on these funds; however, as legal title of
the state match is retained by the State Regents, only the funds available for distribution, for which the Center
has incurred allowable reimbursable expenses, or $4,542 and $5,593 at June 30, 2010 and 2009, respectively,
have been reflected as assets in the statements of net assets. With regard to the institutional matching funds,
approximately $224,856 and $208,663, of cumulative undisbursed contributions have been made to the OU
Foundation, for the benefit of the Center, and are on deposit with the OU Foundation at June 30, 2010 and
2009, respectively.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
20
NOTE 8 - CAPITAL ASSETS
Capital asset activity for the year ended June 30, 2010, includes the following:
Beginning Ending
Balance Additions Transfers Deductions Balance
Capital assets not being depreciated:
Land $ 26,045 $ - $ - $ - $ 26,045
Construction in-progress 43,685 64,120 (5,927) (997) 100,881
Total capital assets not
being depreciated 69,730 64,120 (5,927) (997) 126,926
Capital assets being depreciated:
Improvements 12,926 32 277 - 13,235
Buildings 344,271 1,492 4,224 - 349,987
Equipment 96,856 11,735 571 (4,040) 105,122
Infrastructure 1,142 - 574 - 1,716
Leasehold improvements 17,093 150 281 - 17,524
Library materials 26,688 1,425 - - 28,113
Total capital assets being
depreciated 498,976 14,834 5,927 (4,040) 515,697
Less accumulated depreciation
Improvements 8,359 1,284 - - 9,643
Buildings 79,223 6,866 - - 86,089
Equipment 56,995 9,209 - (2,705) 63,499
Infrastructure 597 66 - - 663
Leasehold improvements 9,761 1,539 - - 11,300
Library materials 19,902 1,310 - - 21,212
Total accumulated depreciation 174,837 20,274 - (2,705) 192,406
Total capital assets being
depreciated, net 324,139 (5,440) 5,927 (1,335) 323,291
Capital assets, net $ 393,869 $ 58,680 $ - $ (2,332) $ 450,217
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
21
NOTE 8 - CAPITAL ASSETS--CONTINUED
Capital asset activity for the year ended June 30, 2009, includes the following:
Beginning Ending
Balance Additions Transfers Deductions Balance
Capital assets not being depreciated:
Land $ 25,805 $ 240 $ - $ - $ 26,045
Construction in-progress 40,626 29,722 (26,321) (342) 43,685
Total capital assets not
being depreciated 66,431 29,962 (26,321) (342) 69,730
Capital assets being depreciated:
Improvements 12,882 44 12,926
Buildings 282,019 36,271 26,229 (248) 344,271
Equipment 90,513 10,661 81 (4,399) 96,856
Infrastructure 1,132 10 1,142
Leasehold improvements 17,312 710 11 (940) 17,093
Library materials 25,202 1,486 - 26,688
Total capital assets being
depreciated 429,060 49,182 26,321 (5,587) 498,976
Less accumulated depreciation
Improvements 7,074 1,285 - 8,359
Buildings 73,006 6,217 - 79,223
Equipment 51,231 8,746 - (2,982) 56,995
Infrastructure 551 46 - 597
Leasehold improvements 9,022 1,225 - (486) 9,761
Library materials 18,613 1,289 - - 19,902
Total accumulated depreciation 159,497 18,808 - (3,468) 174,837
Total capital assets being
depreciated, net 269,563 30,374 26,321 (2,119) 324,139
Capital assets, net $ 335,994 $ 60,336 $ - $ (2,461) $ 393,869
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
22
NOTE 9 - DEFERRED REVENUE
Deferred revenue consists of the following at June 30:
2010 2009
Auxiliary enterprises and other activities $ 22 $ 29
Long-term contracts 3,612 295
$ 3,634 $ 324
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
23
NOTE 10 - LONG-TERM LIABILITIES
The following is a summary of long-term obligation transactions of the Center for the year ended June
30, 2010:
Issue Interest Maturity Beginning Ending Current
Dates Rates Through Balance Additions Deductions Balance Portion
Bonds, notes and capital leases (In %)
Revenue bonds payable:
Student Center Series 1995 1995 4.25-8.25 11/1/2015 $ 965 $ - $ (965) $ - $ -
Utility System Series 1998 1998 6.50-7.00 7/1/2018 4,925 - (355) 4,570 4,570
Student Center Series 2001 2001 4.25-5.27 6/1/2026 2,736 - (2,623) 113 113
Utility System Series 2004A&B 2004 2.61-4.85 11/1/2019 7,745 - (570) 7,175 591
General Revenue Bonds Series 2008 2008 3.28-6.63 7/1/2036 69,566 24 69,590 1,191
General Obligation Bonds Series 2010A &B 2010 1.24-5.00 7/1/2030 - 31,552 (6) 31,546 46
85,937 31,552 (4,495) 112,994 6,511
Notes payable 3,400 - (327) 3,073 734
ODFA capital leases payable 8,167 339 (969) 7,537 1,019
OCIA capital leases payable 24,820 - (468) 24,352 672
Total bonds, notes, and capital leases 122,324 31,891 (6,259) 147,956 8,936
Other noncurrent liabilities
Accrued compensated absences 28,011 690 - 28,701 23,248
Post employment benefits obligation 31,262 19,365 (2,980) 47,647 3,427
Federal loan program contributions
refundable 6,646 79 - 6,725 -
Total other noncurrent liablities 65,919 20,134 (2,980) 83,073 26,675
Total noncurrent liabilities $ 188,243 $ 52,025 $ (9,239) $ 231,029 $ 35,611
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
24
NOTE 10 - LONG-TERM LIABILITIES - CONTINUED
The following is a summary of long-term obligation transactions of the Center for the year ended June
30, 2009:
Issue Interest Maturity Beginning Ending Current
Dates Rates Through Balance Additions Deductions Balance Portion
Bonds, notes and capital leases (In %)
Revenue bonds payable:
Student Center Series 1995 1995 4.25-8.25 11/1/2015 $ 1,080 $ - $ (115) $ 965 $ 120
Utility System Series 1998 1998 6.50-7.00 7/1/2018 5,260 - (335) 4,925 355
Student Center Series 2001 2001 4.25-5.27 6/1/2026 2,840 - (104) 2,736 109
Utility System Series 2004A&B 2004 2.61-4.85 11/1/2019 8,295 - (550) 7,745 570
General Revenue Bonds Series 2008 2008 3.28-6.63 7/1/2036 - 70,407 (841) 69,566 1,191
17,475 70,407 (1,945) 85,937 2,345
Notes payable 3,903 - (503) 3,400 520
ODFA capital leases payable 9,071 - (904) 8,167 932
OCIA capital leases payable 25,270 - (450) 24,820 468
Total bonds, notes, and capital leases 55,719 70,407 (3,802) 122,324 4,265
Other noncurrent liabilities
Accrued compensated absences 26,271 1,740 - 28,011 22,969
Post employment benefits obligation 15,769 18,003 (2,510) 31,262 2,510
Federal loan program contributions
refundable 6,562 84 - 6,646 -
Total other noncurrent liablities 48,602 19,827 (2,510) 65,919 25,479
Total noncurrent liabilities $ 104,321 $ 90,234 $ (6,312) $ 188,243 $ 29,744
Revenue Bonds Payable
In FY09, General Revenue Bonds, Series 2008A and 2008B, were issued by the Board of Regents
pursuant to the Master Resolution establishing the University of Oklahoma Health Sciences Center
General Revenue Financing System in support of funding for the OU Cancer Institute. The revenue
pledged as security for these obligations is any or all revenues of the Center which are lawfully available
for the payment of obligations, excluding revenues appropriated by the state legislature (except for in
certain circumstances the Dedicated Tobacco Tax Revenues), funds whose purpose has been restricted
by the donors or grantors to a purpose inconsistent with the payment of such obligations, and any funds
pledged for Prior Encumbered Obligations.
In FY10, General Obligation Bonds, Series 2010A and 2010B, were issued by the Board of Regents
pursuant to the Master Resolution establishing the University of Oklahoma Health Sciences Center
General Revenue Financing System. These bonds were issued to provide funds to refund certain prior
bond issues, and to construct, renovate, remodel, expand and equip certain additions and improvements
to parking, utility, and data center facilities on the Center’s Oklahoma City campus. The revenue pledged
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
25
NOTE 10 - LONG-TERM LIABILITIES - CONTINUED
as security for these obligations is any or all revenues of the Center which are lawfully available for the
payment of obligations, excluding revenues appropriated by the state legislature, funds whose purpose
has been restricted by the donors or grantors to a purpose inconsistent with the payment of such
obligations, and any funds pledged for prior encumbered obligations.
Revenue bonds issued prior to the Resolution (Prior Encumbered Obligations) are payable both as to
principal and interest from the net revenues arising from operations of the physical plant utilities system
and certain student fees which are pledged under the various bond indentures. At June 30, 2010 and
2009, the Center had $5,850 and $1,636 respectively, of cash and investments held in trust for the bond
indentures, restricted to the payment of principal and interest.
Tulsa Campus Series 2003 Defeasance
On December 5, 2006, the Board of Regents of The University of Oklahoma authorized the issuance of
the $3,500 Board of Regents of the University of Oklahoma on behalf of the University of Oklahoma
Health Sciences Center Refunding Revenue Note, Series 2007 (the “Series 2007 Note”). The proceeds
of the Series 2007 Note along with existing Center funds were used to advance refund the remainder of
the $17,770 The Board of Regents of the University of Oklahoma University of Oklahoma Tulsa Campus
Revenue Bonds Series 2003A (the “Series 2003 Bonds”) which was loaned to the Board of Regents of the
University of Oklahoma and used in the acquisition of the Tulsa Campus located at 4502 E. 41st Street,
Tulsa, Oklahoma. The Series 2007 Note is dated June 1, 2007 and is payable solely from the net revenues
of the clinical operations of the Tulsa branch of the University of Oklahoma College of Medicine. The
Series 2007 Note bears interest at 3.94% and is payable over 8.5 years, with annual payments of $489.
The outstanding balance at June 30, 2010 and 2009 was $2,591 and $2,781 respectively. In accordance
with the advanced refunding, the Center deposited $17,360 into an escrow fund and purchased
government securities bearing interest in amounts sufficient to pay the Series 2003 Bonds at January 1,
2014. Accordingly, the Series 2003 Bonds are considered to have been extinguished and neither the 2003
Series Bonds nor the associated escrow fund are included in the University’s statements of net assets as
of June 30, 2010. The balance of the 2003 Series Bonds outstanding at June 30, 2010 and 2009 was
$14,910 and $15,770 respectively.
Refunding
Prior to June 30, 2010, part of the new Series 2010A/B bonds were used to currently refund the $845
outstanding principal balance of the Series 1995 Student Center Revenue bonds. The Series 1995 bonds
were loaned to the Board of Regents of the University of Oklahoma to construct a student center on the
Oklahoma City campus.
Also prior to June 30, 2010, the Series 2010A/B bonds were used to advance refund $2,535 of the series
2001 Student Center bonds. The remaining principal balance of $115 will be paid by the Center
according to the bond schedule on June 1, 2011. The Series 2001 bonds were loaned to the Board of
Regents of the University of Oklahoma to construct, renovate, remodel, furnish, equip and expand a
Student Center, pavilion and intramural playing field on the Center’s Oklahoma City campus. The
applicable portion of the 2010A bonds is payable over 16 years. The outstanding balance at June 30,
2010 is $2,655. In accordance with the advanced refunding, the Center deposited $2,697 into an escrow
fund and purchased government securities bearing interest in amounts sufficient to pay the Series 2001
bonds at December 1, 2011. Accordingly, the $2,535 of the Series 2001 bonds is considered to have been
extinguished and neither these bonds nor the associated escrow fund are included in the Center’s
statement of net assets as of June 30, 2010.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
26
NOTE 10 - LONG-TERM LIABILITIES - CONTINUED
Capital Lease Obligations
ODFA Master Lease Obligations
In August 2005, the Center entered into a 7 year lease agreement with ODFA and the State Regents as
beneficiary of a portion of the proceeds from the Oklahoma Development Finance Authority Oklahoma
State Regents for Higher Education Master Lease Revenue Bonds Series 2005B. The Center financed
$2,300 to upgrade the parking access system. Assets under this capital lease totaled $1,267 and $1,472 net
of accumulated depreciation of $1,033 and $828 at June 30, 2010 and 2009. Depreciation expense on
these capital lease assets is included in depreciation expense on the statements of revenues, expenses and
changes in net assets.
In May 2006, the Center entered into a 5 year lease agreement with ODFA and the State Regents as
beneficiary of a portion of the proceeds from the Oklahoma Development Finance Authority Oklahoma
State Regents for Higher Education Master Lease Revenue Bonds Series 2006A. The Center financed
$940 to purchase two mammography systems. Assets under this capital lease totaled $548 and $641 net
of accumulated depreciation of $392 and $299 at June 30, 2010 and 2009 respectively. Depreciation
expense on these capital lease assets is included in depreciation expense on the statements of revenues,
expenses and changes in net assets.
In December 2007, the Center entered into a 15 year lease agreement with ODFA and the State Regents
as beneficiary of a portion of the proceeds from the Oklahoma Development Finance Authority
Oklahoma State Regents for Higher Education Master Lease Revenue Bonds Series 2007B. The Center
financed $6,067 to renovate the Medical Student Education Facility on the Oklahoma City, Oklahoma
campus. Assets under this capital lease totaled $5,824 and $5,946 net of accumulated depreciation of
$243 and $121 as of June 30, 2010 and 2009, respectively. Depreciation expense on these capital lease
assets is included in depreciation expense on the statements of revenues, expenses and changes in net
assets.
In December 2007, the Center entered into a 15 year lease agreement with ODFA and the State Regents
as beneficiary of a portion of the proceeds from the Oklahoma Development Finance Authority
Oklahoma State Regents for Higher Education Master Lease Revenue Bonds Series 2007C. The Center
financed $1,304 to construct a cooling tower on the Tulsa Oklahoma campus. Assets under this capital
lease totaled $1,250 and $1,276 net of accumulated depreciation of $54 and $28 at June 30, 2010 and
2009 respectively. Depreciation expense on these capital lease assets is included in depreciation expense
on the statements of revenues, expenses and changes in net assets.
In July 2009, the Center entered into a 5 year lease agreement with ODFA and the State Regents as
beneficiary of a portion of the proceeds from the Oklahoma Development Finance Authority Oklahoma
State Regents for Higher Education Master Lease Revenue bonds Series 2009B. The Center financed
$333 to purchase a Practice Management System. Assets under this capital lease totaled $287 net of
accumulated depreciation of $46 at June 30, 2010. Depreciation expense on these capital lease assets is
included in depreciation expense on the statements of revenues, expenses and changes in net assets.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
27
NOTE 10 - LONG-TERM LIABILITIES - CONTINUED
OCIA Capital Lease Obligations
In the fall of 2005, the Center entered into a 25 year lease agreement with the Oklahoma Capital
Improvement Authority (“OCIA”) and the Oklahoma State Regents for Higher Education as beneficiary
of a portion of the proceeds from the OCIA State Facilities Revenue Bonds, Series 2005F and 2005G.
The Center received $26,146 of the proceeds for capital improvement projects on the Oklahoma City and
Tulsa Campuses as approved by the Regents. Assets and construction in progress under these capital
leases totaled $25,196 and $25,713, net of accumulated depreciation of $950 and $433 at June 30, 2010
and 2009, respectively.
Lease payments made by the State of Oklahoma on behalf of the Center are held by the OCIA for future
principal and interest payments of the OCIA Bonds. The OCIA deposits the lease payments into an
interest-bearing fund and may use the interest earnings to reduce the Center’s future lease payments.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
28
NOTE 10 - LONG-TERM LIABILITIES - CONTINUED
Lease payments made by the State of Oklahoma on behalf of the Center are held by the OCIA for future
principal and interest payments of the OCIA Bonds. The OCIA deposits the lease payments into an
interest-bearing fund and may use the interest earnings to reduce the Center’s future lease payments.
Maturities of principal and interest requirements on revenue bonds payable, capital lease obligations and
notes payable are as follows at June 30, 2010:
2016 2021 2026 2031 2036
2011 2012 2013 2014 2015 2020 2025 2030 2035 2040 Total
Student Center Series 1995 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Utility System Series 1998 4,722 - - - - - - - - - 4,722
Student Center Series 2001 120 - - - - - - - - - 120
Utility System Series 2004A&B 874 873 874 869 874 4,361 - - - - 8,725
Cancer Center - 2008 4,832 4,825 4,822 4,819 4,806 23,993 23,888 23,908 23,799 9,478 129,170
General Obligation - 2010 707 2,829 3,083 3,083 3,073 14,187 11,345 3,542 256 - 42,105
Total principal and interest 11,255 8,527 8,779 8,771 8,753 42,541 35,233 27,450 24,055 9,478 184,842
Less: interest 4,744 4,940 4,827 4,699 4,545 19,795 14,080 8,977 4,764 477 71,848
Total principal 6,511 3,587 3,952 4,072 4,208 22,746 21,153 18,473 19,291 9,001 112,994
Capital leases 3,144 2,922 2,571 2,572 2,527 13,174 11,475 9,885 - 48,270
Less: interest 1,453 1,390 1,331 1,280 1,225 5,173 3,230 1,299 - - 16,381
Total principal 1,691 1,532 1,240 1,292 1,302 8,001 8,245 8,586 - - 31,889
Notes payable 902 659 702 489 489 245 - - - - 3,486
Less: interest 168 97 79 41 23 5 - - - - 413
Total principal 734 562 623 448 466 240 - - - - 3,073
Total $ 8,936 $ 5,681 $ 5,815 $ 5,812 $ 5,976 $ 30,987 $ 29,398 $ 27,059 $ 19,291 $ 9,001 $ 147,956
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
29
NOTE 11 - OPERATING LEASES
The Center has entered into certain other operating leases for equipment, office space, vehicles and other
miscellaneous items. All operating leases are for a one-year term with an option to renew based on
available funding. Rental expenditures under all operating leases were approximately $7,813 and $6,454
for 2010 and 2009, respectively.
NOTE 12 - RETIREMENT PLANS
The Center’s academic and nonacademic personnel are covered by various retirement plans depending on
job classification. The plans available to Center personnel include the Oklahoma Teacher’s Retirement
System, the University of Oklahoma Defined Contribution Plan, and the University of Oklahoma
Defined Contribution Plan for Hourly Employees who are not participants of the Oklahoma Teachers’
Retirement System.
A summary of significant data for each of the retirement plans follows:
 Defined Benefit Plan
Plan Description: The Center contributes to the Oklahoma Teachers’ Retirement System (the “OTRS”
or the “System”), a cost-sharing multiple-employer public employee retirement system which is self-administered.
The OTRS provides retirement, disability, and death benefits to plan members and
beneficiaries. The benefit provisions are established and may be amended by the legislature of the State
of Oklahoma. Title 70 of the Oklahoma statutes, Sections 17-101 through 116.9, as amended, assigns the
authority for management and operation of the plan to the Board of Trustees of the System.
The System issues a publicly available annual financial report that includes financial statements and
required supplementary information for the OTRS. That annual report may be obtained by writing to
the OTRS, P.O. 53524, Oklahoma City, OK 73152 or by calling (405)-521-2387, or at the OTRS website
at www.trs.state.ok.us.
Funding Policy: The System members and the Center are required to contribute at a rate set by statute.
The contribution requirements of the System members and the Center are established and may be
amended by the legislature of the State of Oklahoma.
The 2010 and 2009, the contribution rate for System members of 7% is applied to their total
compensation for those employees participating.
For 2010 the local employer contribution rate was 8.05% for Jul-Dec 2009 and 8.55% for Jan-Jun 2010
while in 2009, the local employer contribution rate due from the Center was 7.55% for Jul-Dec 2008 and
8.05% for Jan-Jun 2009. For the years ended June 30, 2010 and 2009, the State contributed 5% of State
revenues from sales and use taxes and individual income taxes. Contributions made by the State from
the dedicated taxes are considered on-behalf payments for the Center’s employees. The amount
benefiting the Center’s employees is estimated at $8,470 and $9,848 for the years ended June 30, 2010
and 2009, respectively, based on an allocation of the Center’s covered payroll to total payroll for the
OTRS.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
30
NOTE 12 - RETIREMENT PLANS - CONTINUED
The Center’s contributions to the System for the years ended June 30, 2010, 2009, and 2008 were
approximately $12,399, $11,661, and $10,942, respectively, and were equal to the required contributions
for each year.
 Defined Contribution Plans – Optional Retirement Plan
Plan Description: Monthly employees, hired July 1, 2004 or later, who would have been previously
required to participate in OTRS, now have the option to elect either OTRS (along with Plans 1 or 2
described below) or the Optional Retirement Plan (ORP) within the first 90 days of employment. This is
a one-time election and if an employee does not make an election, the employee defaults into OTRS and
will also participate in Plan 1 or 2 of the Defined Contribution Plan noted below. Hourly employees not
participating in OTRS are also included in this plan; however their option to not participate in OTRS is
revocable and can be changed upon their request.
Under the ORP, the Center contributes, at the direction of the participating employee, to four separate
retirement investment firms. The four firms are: 1) the Teachers Insurance Annuity Association -
College Retirement Equities Fund, 2) Fidelity Investments Company, 3) ING (Aetna) Retirement Plans,
and 4) The Vanguard Group of Investment Companies. The ORP is a non-contributory defined
contribution plan and the four participating retirement investment firms are separately managed. The
authority for contributing to the Defined Contribution plans is contained in the following policy
document, “University of Oklahoma Defined Contribution Retirement Plan”, amended and restated July
2004.
Funding Policy: The ORP provisions and contribution requirements are established and may be
amended by the Center. The Center’s contribution rate is 9% of covered payroll and is determined by
the previously mentioned plan document. The Center’s contributions to the ORP for the years ended
June 30, 2010, and 2009, were approximately $13,242 and $11,559, respectively. Employees do not
contribute to the ORP. The vesting period for the ORP is three years.
 Defined Contribution Plan –Plan 1 and Plan 2
Plan Descriptions: For employees participating in OTRS, contributions to the defined contribution plan
fall into Plan 1 or Plan 2 depending upon the employee’s participation date. The Center contributes at
the direction of the participating employee, to four separate retirement investment firms. The four firms
are: 1) the Teachers Insurance Annuity Association - College Retirement Equities Fund, 2) Fidelity
Investments Company, 3) ING (Aetna) Retirement Plans, and 4) The Vanguard Group of Investment
Companies. Plans 1 and 2 are non-contributory defined contribution plans and the four participating
retirement investment firms are separately managed. The authority for contributing to the Defined
Contribution plans is contained in the following policy document, “University of Oklahoma Defined
Contribution Retirement Plan”, amended and restated July 2004.
Funding Policy – Plan 1 and Plan 2 provisions and contribution requirements are established and may be
amended by the Center. The Center’s contribution rate is 15% for Plan 1 and 8% for Plan 2 of covered
payroll and is determined by the previously mentioned plan document. Total contributions to Plans 1
and 2 were $11,829 and $5,829, respectively, for the year ended June 30, 2010. Total contributions to
Plans 1 and 2 were $11,968 and $5,705, respectively, for the year ended June 30, 2009. Employees do not
contribute to Plans 1 and 2. The vesting period for both Plan 1 and Plan 2 is three years.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
31
NOTE 13 - OTHER POST-EMPLOYMENT BENEFITS
Plan Description – Health and dental insurance is provided by the Center for all retirees who began
employment prior to January 1, 2008, and meet specific age and service requirements. Employees hired
on or after January 1, 2008, have the ability to continue to participate in the medical and dental plans at
the group rates at the retiree’s own expense. Retirees may also elect the Center’s health and dental
coverage for eligible dependents at their own expense. The Center has the authority to establish and
amend the benefit provisions offered to retirees. The Center’s retiree insurance plan is considered a
single-employer defined benefit plan. After retirees become eligible for Medicare primary coverage, those
participating in the OTRS (see Note 12) are provided with the Oklahoma State and Education
Employees Group health plan as a secondary plan. For retirees not participating in OTRS, the Center’s
insurance continues in a secondary role. The Center’s plan does not issue a standalone financial report.
Funding Policy - For the Center’s plan, the contribution requirement is based on a projected pay-as-you-go
basis. The funding policy may be amended by the Regents of the University. The Center pays the
premiums for the retirees. On June 30, 2010, 1,189 retirees met the age and service eligibility
requirements. For the years ended June 30, 2010 and 2009, the Center contributed $2,980 and $2,510,
respectively, for current retirees.
Annual OPEB Cost and Net OPEB Obligation – The Center’s annual other postemployment benefit
(OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC),
an amount actuarially determined in accordance with the parameters of GASB No. 45. The ARC
represents the level of funding that, if paid on an ongoing basis, is projected to cover normal cost each
year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty
years. The following table shows the components of the Center’s annual OPEB cost, the amount
actually contributed by the Center, and changes in the Center’s net OPEB obligation for the years ended
June 30:
2010 2009
Annual Required Contribution (ARC) and annual OPEB cost $ 19,366 $ 18,003
Contributions paid during year (2,981) (2,510)
Increase in net OPEB obligation 16,385 15,493
Net OPEB obligation-beginning of year 31,262 15,769
Net OPEB obligation-end of year $ 47,647 $ 31,262
Funded Status and Funding Progress – The unfunded actuarial accrued liability, totaled $152,003 as of
the January 1, 2010 actuarial valuation date. The initial unfunded actuarial accrued liability (UAAL) is
being amortized over an open period of thirty years using the level percentage of projected covered
payroll amortization method. The covered payroll (annual payroll of active employees covered by the
plan) was $249,437 and the ratio of the UAAL to the covered payroll was 61 percent.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions
about the probability of occurrence of events far into the future. Examples include assumptions about future
employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of
the plan and the annual required contributions of the employer are subject to continual revision as actual
results are compared with past expectations and new estimates are made about the future. The schedule of
funding progress, presented as required supplementary information following the notes to the financial
statements, presents multi-year trend information about whether the actuarial value of plan assets is
increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
32
NOTE 13 - OTHER POST-EMPLOYMENT BENEFITS -CONTINUED
Actuarial Methods and Assumptions – Projections of benefits for financial reporting purposes are based
on the Retirement Policy document, amended as of July 1, 2002. The actuarial methods and assumptions
used include techniques that are designed to reduce the effects of short-term volatility in reported
amounts and reflect a long-term perspective of the calculations. In the January 1, 2010 actuarial valuation
date, the entry age actuarial cost method was used. The actuarial assumptions include the following: a 6
percent investment rate of return, which is based on the expected long-term investment returns of the
Center’s own investments, an annual healthcare cost trend rate of 9.5 percent initially, reduced by
decrements to 4.5 percent after seven years, and a payroll annual inflation rate of 3 percent.
NOTE 14 - RISK MANAGEMENT
Due to the diverse risk exposure of the Center, the insurance portfolio contains a comprehensive variety
of coverage. Oklahoma Statutes require participation of all State agencies in basic general liability, tort
claim coverage, directors and officers liability, and property and casualty programs provided by the State
of Oklahoma Department of Central Services Risk Management Division (“DCSRMD”). In addition to
these basic policies, the Center’s Department of Risk Management establishes guidelines in risk
assessment, risk avoidance, risk acceptance and risk transfer.
The Center and individual employees are provided sovereign immunity when performing official business
within the scope of their employment under the Oklahoma State Tort Claims Act.
Beyond acceptable retention levels, complete risk transfer is practiced by purchasing conventional
insurance coverage either directly from a provider or through DCSRMD. These coverages are as follows:
 The buildings and contents are insured for replacement value. Each loss incident is subject to a $500
deductible.
 General liability and tort claim coverages (including comprehensive general liability, auto liability,
personal injury liability, aircraft liability, watercraft liability, leased vehicles and equipment) are
purchased by the Center from DCSRMD. To complement coverage provided by State Statute,
additional coverage is purchased based on specific departmental and institutional needs and risks, but
the related risks are not considered material to the Center as a whole. The Center has not filed any
claims in any of the past three fiscal years.
Self-Funded Programs
The Center’s workers’ compensation program is self-funded and is administered by a third party. The
Center maintains a cash deposit with the administrator and reimburses the administrator for claims paid
on a monthly basis and administrative expenses are paid on a quarterly basis. Benefits provided are
prescribed by State statute and include lump sum payments for rated disabilities, in addition to medical
expenses and a portion of salary loss, resulting from an on-the-job injury or illness. The Center records a
liability for workers’ compensation in its financial statements based on annual actuarial valuations. As of
June 30, 2010 and 2009, the accrued workers’ compensation liability totaled approximately $2,534 and
$2,274, respectively.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
33
NOTE 14 - RISK MANAGEMENT - CONTINUED
The Center’s unemployment compensation insurance program is also self-funded. Unemployment
benefits that separated employees receive are determined by Oklahoma Statutes and are administered by
the Oklahoma Employment Security Commission (“OESC”). As a reimbursing employer, the Center is
billed quarterly by the OESC for benefits paid to former employees. The Center’s reserve with the
OESC is the average claims paid over the past three years. As of June 30, 2010 and 2009, the required
reserve was $299 and $227, respectively. The minimum cash balance is considered each year during the
fringe benefit rate-setting process.
NOTE 15 - CONTINGENCIES AND COMMITMENTS
At June 30, 2010 and 2009, the Center had outstanding commitments under construction contracts of
$78,839 and $25,127, respectively.
In the normal course of operations, the Center is a defendant in several lawsuits; however, Center
officials are of the opinion, based on the advice of in-house legal counsel, that the ultimate outcome of
this litigation will not have a material effect on the future operations or financial position of the Center.
The Center receives grants and other forms of reimbursement from various federal and state agencies.
These activities are subject to audit by agents of the funding authority, the purpose of which is to ensure
compliance with conditions precedent to providing such funds. Management believes that the liability, if
any, for reimbursement which may arise as the result of audits, would not be material.
NOTE 16 – AFFILIATES AND RELATED PARTY TRANSACTIONS
HCA Health Services of Oklahoma, Inc. d/b/a OU Medical Center
The Center has contracts with HCA Health Services of Oklahoma, Inc. d/b/a OU Medical Center
(“HCA”) for the Center’s staff to provide in-service education and administrative duties within University
Hospital and Children’s Hospital of Oklahoma, two of the institutions comprising the OU Medical
Center. In addition, the Center provides phone services and steam and chilled water for heating and
cooling purposes to the OU Medical Center. Total sales and services under the above transactions were
approximately $30,022 and $26,516 for 2010 and 2009, respectively. Amounts due from HCA for such
transactions was $5,102 and $4,586 as of June 30, 2010 and 2009, respectively, and is included in accounts
receivable, net of allowances, on the statement of net assets.
The Tulsa Foundation for Health Care Services, Inc.
The Tulsa Foundation for Health Care Services, Inc. (the “Tulsa Foundation”) is an Oklahoma not-for-profit
organization organized for the benefit of, to perform the functions of, or carry out the purposes of,
the University of Oklahoma College of Medicine – Tulsa Bedlam Clinic and/or successor clinics. The
purposes of the Tulsa Foundation are exclusively charitable, educational and research, specifically to
receive funds from various entities to provide compassionate medical and health care services for the
underserved community in the greater Tulsa area with an emphasis on caring for children and their
families through the Bedlam Clinic, or its successor entities. The economic resources received and held
by the Tulsa Foundation for the benefit of the Center are not significant to its overall financial position.
As a result, the Tulsa Foundation is not considered a component unit of the Center under the definition
of GASB Statement No. 39.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
34
NOTE 16 – AFFILIATES AND RELATED PARTY TRANSACTIONS - CONTINUED
The Academic Physicians Insurance Company
The Academic Physicians Insurance Company (the “Captive”), formed in 2006, is a not-for-profit
insurance company formed and domiciled in the State of Vermont as an Alternative Risk Financing
Vehicle for the purpose of financing the medical professional liability insurance for College of Medicine
faculty practicing as OU Physicians. Premiums paid by the Center to obtain professional liability
coverage from the Captive totaled $9,989 and $9,063 for fiscal years 2010 and 2009 respectively, thus
eliminating the Center’s deductible expense for current and future claims. As of and for the year ended
June 30, 2010, the economic resources of the Captive include total assets of $38,622 total revenue of
$9,171 and total fund balance of $15,273. The Captive is not considered a component unit of the Center
under the definition of GASB Statement No. 39, as the economic resources received and held by the
Captive are not significant to the Center’s overall financial position and the Center is not entitled to, or
have the ability to otherwise access a majority of the resources received or held by the Captive.
University of Oklahoma Norman Campus
As discussed in Note 1, the University of Oklahoma Norman Campus (“Norman Campus”) is an agency
of the State of Oklahoma governed by The Board of Regents of the University of Oklahoma and the
Oklahoma State Regents for Higher Education. The Norman Campus is a distinct operational entity
from the Center. However, Norman Parking and Transportation/CART had incurred two bond system
obligations, each of which a portion was used to benefit the Center’s Parking and Transportation.
Although there is no legal note obligation that the Center must reimburse Norman Campus for their
portion of the principal and interest payments of the related bond obligations, the Center has agreed to
reimburse Norman Campus for their portion of the debt service. This is reflected in the financial
statements as a note payable, with current and noncurrent portions separately stated. With respect to the
2004 Parking Refunding bonds, during the years ended 2010 and 2009, the Center made principal and
interest payments of $167 and $166 to Norman Campus, leaving a balance due of $483 and $620 at June
30, 2010 and 2009, respectively.
The University of Oklahoma Foundation
The OU Foundation is a private foundation organized to receive and administer gifts for the benefit of
the Norman Campus and the Center. At June 30, 2010 and 2009, the OU Foundation had audited net
assets of approximately $748,830 and $669,341, respectively. The OU Foundation expended on behalf of
the Norman Campus and the Center approximately $117,867 in 2010 and $104,978 in 2009 for facilities
and equipment, salary supplements, general educational assistance, faculty awards and scholarships. Of
these expenditures, $10,603 in 2010 and $13,085 in 2009 are reflected in the Center’s financial statements
as revenue or private gifts and expenditures. The amounts not reflected herein consist of direct OU
Foundation expenditures for general university educational purposes and amounts reflected in the
Norman Campus financial statements.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
35
NOTE 17 - SEGMENT INFORMATION
The following financial information represents identifiable activities for which one or more revenue
bonds are outstanding. These activities provide student facilities and utilities for the Center.
CONDENSED STATEMENT OF NET ASSETS 2010 2009 2010 2009
Assets:
Current assets $ 789 $ 759 $ 9,586 $ 5,387
Non-current assets - 61 71
Capital assets 5,175 5,272 24,750 24,545
Total assets 5,964 6,031 34,397 30,003
Liabilities
Current liabilities 114 249 5,373 1,154
Long-term liabilities - 3,473 6,583 11,744
Total liabilities 114 3,722 11,956 12,898
Net assets:
Invested in capital assets net of related debt 5,061 1,570 13,006 11,875
Restricted
Expendable
Capital projects 279 313 589 570
Debt service 57 47 5,710 1,492
Unrestricted 453 379 3,136 3,168
Total Net Assets $ 5,850 $ 2,309 $ 22,441 $ 17,105
CONDENSED STATEMENT OF REVENUES,
EXPENSES AND CHANGES IN NET ASSETS
Operating revenues $ 832 $ 843 $ 11,713 $ 12,670
Operating expenses:
Depreciation expense (161) (162) (836) (828)
Other expenses (359) (362) (9,576) (10,852)
Net operating income 312 319 1,301 990
Nonoperating expenses 3,229 (189) 4,035 (603)
Change in net assets 3,541 130 5,336 387
Net assets at beginning of year 2,309 2,179 17,105 16,718
Net assets at end of year $ 5,850 $ 2,309 $ 22,441 $ 17,105
CONDENSED STATEMENT OF CASH FLOWS
Net cash flows - operating activities $ 312 $ 318 $ 1,292 $ 1,160
Net cash flows - capital and related financing (291) (256) 2,843 (977)
Net cash flows - investing activities 9 10 55 63
Net increase in cash and cash equivalents 30 72 4,190 246
Cash and cash equivalents at beginning of year 756 684 4,870 4,624
Cash and cash equivalents at end of year $ 786 $ 756 $ 9,060 $ 4,870
Series 1995, 2001 2004A, 2004B
Bonds Series 1998,
Student Center Utility System Revenue
Revenue Bonds
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
36
NOTE 18 – SUBSEQUENT EVENTS
The Center has evaluated events and transactions that occurred subsequent to June 30, 2010 through
October 8, 2010, the date these financial statements were available to be issued, for potential recognition
or disclosure in the financial statements.
At their June 2010 meeting, the Board authorized the sale of the Sheridan Campus property to the Tulsa
Child Abuse Network, Inc. The closing on this property was completed on September 29, 2010, for a
sale price of $1,230. The book value of the campus is $1,437, net of accumulated depreciation of $751.
NOTE 19 - FUNCTIONAL CLASSIFICATIONS
For the years ended June 30, 2010 and 2009, the following table represents operating expenses within
functional classification:
2010 2009
Function
Instruction $175,102 $175,034
Research 80,509 80,608
Public service 31,637 31,445
Academic support 40,154 39,521
Student services 3,599 3,664
Institutional support 31,349 34,947
Operations and maintenance of plant 23,876 29,872
Scholarships/Fellowships 2,300 3,052
Clinical operations 340,911 302,830
Agency 10 7
Auxiliary enterprises 3,256 4,015
Service unit 13,060 16,075
Plant * 5,209 (5,243)
Total Operating Expenses $750,972 $715,827
* Plant expenditures in 2009 reflect a credit due to internal funding which was completed in a subsequent
fiscal year from the initial expenditure. When expenditures occur, the Plant function is initially charged.
Subsequent to the initial expenditure, if internal funding is used to ultimately pay the expense, the cost is
moved from the Plant function to a function assigned to the internal source. This will result in a credit in
Plant expenditures during years in which internal funding is more than the amount of the expenditures.
REQUIRED SUPPLEMENTARY INFORMATION
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
REQUIRED SUPPLEMENTARY INFORMATION
($ in thousands)
June 30, 2010
38
University of Oklahoma Health Sciences Center Retiree Health/Dental Insurance
Schedule of Funding Progress
UAAL as a
Actuarial Actuarial Accrued Unfunded Percentage
Actuarial Value of Liability (AAL) AAL Funded Covered of Covered
Valuation Assets --entry age (UAAL) Ratio Payroll Payroll
Date (a) (b) (b-a) (a/b) (c) ((b-a)/c)
1/1/2008 $ - $ 127,932 $ 127,932 - $ 236,540 54%
1/1/2010 $ - $ 152,003 $ 152,003 - $ 249,437 61%
The Center obtains actuarial valuation biannually in accordance with the provisions of GASB No. 45.
Schedule of Employer Contributions
Annual Percentage
Fiscal Employer Required of ARC Net OPEB
Year End Contributions Contribution Contributed Obligation
June 30, 2008 $ 2,233 $ 18,002 12.40% $ 15,769
June 30, 2009 $ 2,510 $ 18,003 13.90% $ 31,262
June 30, 2010 $ 2,980 $ 19,366 15.40% $ 47,648
Notes to Required Supplementary Information
Annual Required Contributions
See Note 13 for actuarial assumptions and other information used to determine the annual required
contributions (ARC) for the plan.
Audit  Tax  Advisory
Grant Thornton LLP
211 N Robinson, Suite 1200N
Oklahoma City, OK 73102-7148
T 405.218.2800
F 405.218.2801
www.GrantThornton.com
39
Report of Independent Certified Public Accountants on Internal Control Over
Financial Reporting and on Compliance and Other Matters Based on an
Audit of Financial Statements Performed in Accordance with Government
Auditing Standards
Board of Regents of the University of Oklahoma
University of Oklahoma Health Sciences Center
Norman, Oklahoma
We have audited the accompanying financial statements of the University of Oklahoma Health
Sciences Center (the “Center”) as of and for the year ended June 30, 2010, and have issued our
report thereon dated October 8, 2010. We conducted our audit in accordance with auditing
standards generally accepted in the United States of America as established by the American
Institute of Certified Public Accountants and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of the United
States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the Center’s internal control over
financial reporting as a basis for designing our audit procedures for the purpose of expressing
an opinion on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of the Center’s internal control over financial reporting. Accordingly, we express
no such opinion.
A deficiency in internal control over financial reporting exists when the design or operation of a
control does not allow management or employees, in the normal course of performing their
assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material
weakness is a deficiency, or combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the entity’s
financial statements will not be prevented, or detected and corrected on a timely basis.
40
Our consideration of internal control would not necessarily identify all deficiencies in internal
control over financial reporting that might be material weaknesses. Given these limitations,
during our audit we did not identify any deficiencies in the Center’s internal control over
financial reporting that we consider to be material weaknesses. However, material weaknesses
may exist that were not identified.
Our audit was also not designed to identify all deficiencies in internal control over financial
reporting that might be significant deficiencies. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control over financial reporting that is less severe than a
material weakness, yet important enough to merit attention by those charged with governance.
We identified certain deficiencies in internal control over financial reporting, described in the
accompanying Schedule of Findings and Questioned Costs as Item 2010-1, that we consider to
be a significant deficiency in the Center’s internal control over financial reporting.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Center’s financial statements are
free of material misstatement, we performed tests of its compliance with certain provisions of
laws, regulations, contracts and grant agreements, noncompliance with which could have a
direct and material effect on the determination of financial statement amounts. However,
providing an opinion on compliance with those provisions was not an objective of our audit
and, accordingly, we do not express such an opinion. The results of our tests disclosed no
instances of noncompliance or other matters that are required to be reported under Government
Auditing Standards.
This report is intended solely for the information and use of the Audit and Finance Committee,
Board of Regents, management, federal awarding agencies and pass-through entities and is not
intended to be and should not be used by anyone other than these specified parties.
Oklahoma City, Oklahoma
October 8, 2010

Financial statements and report of independent certified
public accountants
University of Oklahoma Health Sciences Center
June 30, 2010 and 2009
C O N T E N T S
Page
MANAGEMENT’S DISCUSSION AND ANALYSIS i
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3
FINANCIAL STATEMENTS
STATEMENTS OF NET ASSETS 5
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS 6
STATEMENTS OF CASH FLOWS 7
NOTES TO FINANCIAL STATEMENTS 9
REQUIRED SUPPLEMENTARY INFORMATION 38
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS 39
i
UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
Management’s Discussion and Analysis
The discussion and analysis of The University of Oklahoma Health Sciences Center’s (the “Center”) financial
statements provides an overview of the Center’s financial activities for the years ending June 30, 2010 and
2009. Management has prepared the financial statements and the related footnote disclosures along with the
discussion and analysis.
Financial Highlights
2010
The Center’s financial position, as a whole, improved during the fiscal year ending June 30, 2010. Net assets
increased approximately $25 million or 3.5% over the previous year. The change resulted from increases in
invested in capital assets of $29.6 million, unrestricted net assets of $10.1 million, and a decrease in restricted
net assets of $14.7 million.
2009
The Center’s financial position, as a whole, improved during the fiscal year ending June 30, 2009. Net assets
increased approximately $51.7 million or 7.8% over the previous year. The change resulted from increases in
restricted net assets of $65.9 million, unrestricted net assets of $11.8 million, and a decrease in invested in
capital assets of $26 million.
The following graph illustrates the comparative change in net assets by category for the periods ended June
30:
Net Assets
302.3
185.4
254.3 244.2
298.7
134.2
232.4
200.1
272.7
0
50
100
150
200
250
300
350
Invested in Capital
Assets
Restricted Unrestricted
(in millions)
2010 2009 2008
ii
Overview of the Financial Statements and Financial Analysis
This report consists of Management’s Discussion and Analysis (this part), the Statements of Net Assets, the
Statements of Revenues, Expenses, and Changes in Net Assets, and the Statements of Cash Flows. These
statements provide both long-term and short-term financial information on the Center as a whole.
The Statement of Net Assets and Statement of Revenues, Expenses, and Changes in Net Assets
The Statement of Net Assets and the Statement of Revenues, Expenses, and Changes in Net Assets report
the Center’s net assets and how they have changed. Net assets—the difference between assets and
liabilities—is one way to measure the Center’s financial health, or position. Over time, increases or decreases
in the Center’s net assets are an indicator of whether its financial health is improving. Non-financial factors
are also important to consider, including student enrollment, condition of campus buildings, patient census,
and trends in national health care reimbursement policies.
These statements include all assets and liabilities using the accrual basis of accounting, which is consistent
with the accounting used by private-sector institutions. All of the current year’s revenues and expenses are
recognized when earned or incurred, regardless of when cash is received or paid.
The following summarizes the Center’s assets, liabilities, and net assets as of June 30, as well as, the Center’s
revenues, expenses, and changes in net assets for the periods ended June 30:
2010 2009 2008
Current Assets $ 528.6 $ 485.4 $ 369.8
Capital Assets, net 450.2 393.9 336.0
Other Noncurrent Assets 51.1 77.3 106.0
Total Assets 1,029.9 956.6 811.8
Current Liabilities 92.5 81.1 69.2
Noncurrent Liabilities 195.4 158.5 77.3
Total Liabilities 287.9 239.6 146.5
Net Assets:
Invested in Capital Assets,
net of related debt 302.3 272.7 298.7
Restricted 185.4 200.1 134.2
Unrestricted 254.3 244.2 232.4
Total Net Assets $ 742.0 $ 717.0 $ 665.3
Increase in Net Assets $ 25.0 $ 51.7
Net Assets, End of Year (in millions)
iii
Statement of Revenues, Expenses, and Changes in Net Assets (in millions)
2010 2009 2008
Operating Revenues $ 624.9 $ 600.5 $ 561.7
Operating Expenses 751.0 715.8 690.6
Operating Income (Loss) $ (126.1) $ (115.3) $ (128.9)
Net Nonoperating Revenues 139.9 135.0 135.6
Other Revenues, Expenses, and Gains or Losses 11.2 32.0 40.0
Net Change in Net Assets $ 25.0 $ 51.7 $ 46.7
Net Assets - Beginning of year 717.0 665.3 618.6
Net Assets - End of year $ 742.0 $ 717.0 $ 665.3
Operating Revenues
Significant changes in operating revenues included the following:
2010
Student tuition and fees revenue increased 2% or $1.0 million in fiscal year 2010. This was due to a new
technology services fee of $40.00 per credit hour being added in the College of Allied Health and an increase
in the technology services fee of $5.00 per credit hour in the College of Dentistry. There also was a small
increase in overall enrollment.
Patient care increased significantly over the past year with additional revenues of $11.3 million. This was due
to increased patient volume, primarily in the departments of Pediatrics and Anesthesiology.
Federal grants and contracts increased during the year by $2.2 million. Sponsored program awards funded
under the American Recovery and Reinvestment Act (ARRA) comprised the majority of the increase in
activity.
Private grants and contracts increased significantly during 2010 with additional revenues of $7.2 million. The
increase was primarily due to increased funding received from the OU Medical Center for mission support.
Sales and services of auxiliary enterprises had a decrease in revenues during 2010 of $1.3 million. This was
primarily due to a decrease in Steam and Chilled Water sales. Lower utility costs resulted in lower revenue
from this unit’s sales. Completion of the network equipment and cabling project for the OU Physicians’
Building in the prior fiscal year negatively impacted current year sales on a comparative basis.
Other revenues increased $4 million during the year. This was due to a 15% increase in sales at the OU
Pharmacist Care Center and a new autistic/special needs children training contract received by the
department of Pediatrics.
2009
Student tuition and fees revenue increased 15% or $7.4 million in fiscal year 2009. This was due to a general
tuition increase in all programs ranging from 2% - 9.9%. A new fee was added for use of the University
iv
Operating Revenues--Continued
Health Club and the Library Resource Fee was increased by $2.50 per hour. Enrollment also increased
during the year in the professional and undergraduate programs by 43 and 154 students, respectively.
Patient care increased significantly over the past year with additional revenues of $23.7 million. This was due
to increased patient volume, primarily in the areas of pediatrics and medicine.
Federal grants and contracts decreased during the year by $1.0 million. Sponsored program awards funded by
the Department of Health and Human Services comprised the majority of the decrease in activity.
State grants and contracts increased during the past year with additional revenues of $1.1 million. This was
primarily the result of increased sponsored program activity.
Private grants and contracts increased significantly during 2009 with additional revenues of $5.3 million. The
increase was primarily due to increases in the Oklahoma City and Tulsa residency programs. In addition,
professional services contractual activity rose within the College of Medicine.
Sales and services of auxiliary enterprises had a large increase in revenues during 2009 – approximately 22%.
This was primarily due to the first full year of revenues generated by the University Health Club and Medical
Office Building. Additionally, there was a significant increase in sales of network equipment and cabling for
the OU Physicians’ Building.
Operating Expenses
Significant changes in operating expenses were the result of the following:
2010
Compensation and benefits expense increased 5% or $26.0 million during fiscal year 2010. The increase was
attributable to increased professional practice plan supplementation payments and higher benefit costs.
Operating Revenues (in millions)
2010 2009 2008
Tuition and Fees $ 56.9 $ 55.9 $ 48.5
Patient Care 278.9 267.6 243.9
Grants and Contracts 231.9 222.6 217.2
Sales and Services of Educational Activities 1.5 1.4 1.6
Auxiliary Enterprises 18.1 19.4 17.1
Other 37.7 33.7 33.4
Total Operating Revenues $ 625.0 $ 600.6 $ 561.7
v
Operating Expenses--Continued
Contractual services expense decreased approximately $4.7 million during the past year. The decrease was
due in part to a reduction in subrecipient activity for various grants during fiscal year 2010, a reduction in
licenses and permits, and the termination of an OB/GYN contract with the Variety Health Center.
Supplies and materials expense was basically flat for the year showing an increase of only $.2 million.
Depreciation expense increased 8% or $1.5 million. The increase was due to an overall increase in the capital
asset base.
Utilities expense decreased 10% or $1.5 million during fiscal year 2010. This was primarily due to market
driven decreases in the prices of electricity, natural gas and water.
Other expenses increased 21% or $14.3 million during the year. This was primarily due to an increase in bad
debt expense for clinical accounts receivable.
2009
Compensation and benefits expense increased 4% or $20.2 million during fiscal year 2009. The increase was
attributable to a campus-wide salary program, higher benefit costs and an increase in full time equivalent
(FTE) positions.
Contractual services expense increased 11% or $6.6 million. The majority of the additional expense occurred
in professional services and was primarily related to increased contractual activity in the College of Medicine.
Supplies and materials expense increased 8% or $4.2 million. The increase was largely due to a rise in
prescription drug costs for resale by the College of Pharmacy. In addition, the cost of chemotherapy drugs in
Oncology continued to increase.
Depreciation expense increased 6% or $1.1 million. The increase was due to an overall increase in the capital
asset base.
Utilities expense increased 6% or $.8 million during fiscal year 2009. This was primarily due to market driven
increases in the prices of electricity incurred during the year, and expanded services provided to the new
College of Allied Health and OU Children’s Physicians Buildings.
Other expenses decreased 10% or $7.7 million during the year. This was largely due to the result of fewer
payments made to the Oklahoma Health Care Authority for graduate medical education, a decrease in the
purchase of expendable equipment, and a decrease in bad debt expense for clinical accounts receivable.
vi
Operating Expenses--Continued
The following summarizes the Center’s operating expenses for the periods ended June 30:
Operating E xpenses (in millions)
2010 2009 2008
Compensation and Be nefits $ 509.8 $ 483.8 $ 463.6
Contractual Se rvices 60.7 65.4 58.8
Supplie s and M aterials 57.9 57.7 53.5
Depre ciation 20.3 18.8 17.7
Utilities 12.0 13.5 12.7
Communications 6.0 6.1 6.2
Scholarships 2.4 2.9 2.8
Other 81.9 67.6 75.3
Total Operat ing Expens es $ 751.0 $ 715.8 $ 690.6
Nonoperating Revenues and Expenses
Significant changes in nonoperating revenues and expenses were the result of the following:
2010
State appropriations decreased 8% or $8.1 million in fiscal year 2010. This was due to a decrease in state
appropriations to higher education and other state agencies as the result of a shortfall in general revenues.
State payments from federal ARRA revenue of $8.2 million was received during the fiscal year offsetting the
reduction in state appropriations.
On-behalf payments decreased 12% or $1.4 million during the year. This was due to decreased payments
made by the State to the Teachers Retirement System.
Private gifts increased 28% or $2 million for the year.
Interest on indebtedness increased 81% or $2.3 million in fiscal year 2010. The increase was primarily due to
interest payments made on debt associated with the OU Cancer Center.
Investment income increased approximately 243% or $9.1 million during fiscal year 2010. The increase was
due to higher market values in the endowed investments which resulted in higher amounts of investment
income earned.
Endowment income decreased 23% or $2.5 million for the year.
2009
State appropriations increased 2% or $2.1 million in fiscal year 2009.
On-behalf payments decreased 5% or $.6 million during the year. This was due to decreased payments made
by the State to the Teachers Retirement System.
vii
Nonoperating Revenues and Expenses--Continued
Private gifts increased 42% or $2.1 million for the year.
Interest on indebtedness increased 24% or $.5 million in fiscal year 2009.
Investment income decreased 56% or $4.8 million during fiscal year 2009. The decrease was due to reduced
market values in the endowed investments which resulted in lower amounts of investment income earned.
Endowment income increased 11% or $1.1 million for the year.
The following summarizes the Center’s nonoperating revenues and expenses for the periods ended June 30:
Nonoperating Revenues and Expenses (in millions)
2010 2009 2008
State Appropriations $ 96.4 $ 104.5 $ 102.3
State Payments from Federal ARRA Revenue 8.2 0.0 0.0
On-behalf Payments 10.1 11.5 12.1
Private Gifts 9.1 7.1 5.0
Interest on Indebtedness (5.1) (2.8) (2.2)
Investment Income 12.8 3.7 8.5
Endowment Income 8.5 11.0 9.9
Net Nonoperating Revenue $ 140.0 $ 135.0 $ 135.6
The Statement of Cash Flows
The primary purpose of the Statement of Cash Flows is to provide information about the cash receipts and
disbursements of an entity during a period. This statement also aids in the assessment of an entity’s ability to
generate future net cash flows, ability to meet obligations as they come due, and needs for external financing.
2010
The Center’s overall liquidity improved during the year, with a net increase to cash of $48.9 million. Cash
used by operating activities decreased approximately $3.8 million over the prior year. This was due to higher
overall revenues more than offsetting increased compensation and benefit costs. Lower contractual services
and other operating costs also had a positive impact on cash used by operating activities for the year.
Significant cash flow increases occurred related to changes in private grant and contract revenues ($10.1
million), patient revenues ($9.5 million), state grants and contracts revenues ($4.9 million), other additions
($4.2 million), and sales and services of auxiliary operations ($1.1 million). Lower cash flows were
experienced in federal grants and contracts revenues ($1.1 million) and steam and chilled water plant revenues
($1 million). Cash flows from State payments from federal ARRA revenue ($8.2 million) offset a decrease in
state appropriations ($8.1 million). Cash flow increases from endowment income ($2.1 million) and private
gifts ($1.7 million) contributed to an overall net increase of approximately $3.8 million in cash flows provided
from non-capital and related financing activities. Cash flows associated with capital and related financing
activities decreased by $70.5 million. An increase in state school land funds ($1 million), private gifts for
viii
The Statement of Cash Flows—Continued
capital projects ($.8 million), endowment gifts ($.2 million), and a decrease in purchases of capital assets ($.5
million) during the year was more than offset by decreased proceeds from bonds payable ($38.9 million), state
grants and contracts for capital projects ($25.6 million), federal grants and contracts for capital projects ($3.7
million), and state appropriations for capital projects ($2 million). Increases in principal paid on debt and
capital leases ($2.5 million) and interest paid on debt and capital leases ($.3 million) negatively impacted the
overall cash use during the year. A decrease in cash flows on the purchase of investments, a decrease in
proceeds from sales and maturities of investments, and a decrease in investment income resulted in an overall
cash decrease from investing activities of approximately $26.7 million.
2009
The Center’s overall liquidity improved during the year, with a net increase to cash of $138.4 million. Cash
used by operating activities increased approximately $5 million over the prior year. This was due to increased
compensation, benefit, contractual services and other operating costs more than offsetting higher overall
revenues. Significant increases in revenues occurred in patient revenues ($24.7 million), tuition and fees
($10.6 million), private grant and contract revenues ($8.1 million), and sales and services of auxiliary
operations ($1.4 million). Lower revenues were experienced in state grants and contracts revenues ($10.5
million) and federal grants and contracts revenues ($5.4 million). State appropriations and private gifts each
rose by approximately $2.1 million, contributing to an overall net increase of approximately $4.3 million in
cash flows provided from non-capital and related financing activities. Cash provided by capital and related
financing activities increased by $73.3 million. An increase in proceeds from bonds payable ($70.4 million),
state grants and contracts for capital projects ($26.5 million), and federal grants and contracts for capital
projects ($2.4 million) during the year more than offset decreased state appropriations for capital projects
revenues ($19.2 million), decreased private gifts for capital projects ($4 million), and endowment gifts ($.4
million). Increases in purchases of capital assets ($1.8 million), principal paid on debt and capital leases ($.5
million) and interest paid on debt and capital leases ($.5 million) negatively impacted the overall cash use
during the year. A decrease in the purchase of investments, an increase in proceeds from sales and maturities
of investments, and an increase in investment income resulted in an overall cash increase from investing
activities of approximately $40 million.
The following summarizes the Center’s cash flows for the periods ended June 30:
Cash Flows for the Year (in millions)
2010 2009 2008
Cash Provided (used) by:
Operating $ (59.7) $ (77.3) $ (72.3)
Noncapital Financing Activities 124.5 120.7 116.4
Capital and Related Financing Activities (51.3) 32.9 (40.4)
Investing Activities 35.4 62.1 21.7
Net Increase in Cash $ 48.9 $ 138.4 $ 25.4
Cash, Beginning of the year $ 370.9 $ 232.5 $ 207.1
Cash, End of the year $ 419.8 $ 370.9 $ 232.5
ix
Capital Asset and Debt Administration
Capital Assets
2010
At June 30, 2010, the Center had approximately $450.2 million invested in capital assets, net of accumulated
depreciation of $192.4 million. Depreciation charges for the current year totaled $20.3 million compared to
$18.8 million in the prior year.
2009
At June 30, 2009, the Center had approximately $394 million invested in capital assets, net of accumulated
depreciation of $175 million. Depreciation charges for the current year totaled $18.8 million compared to
$17.7 million in the prior year.
Major capital project in progress during 2010 included construction of the OU Cancer Institute and
Schusterman Center Library. Additional capital projects initiated during 2010 included improvements to the
Steam and Chilled Water Plant and repairs to the Stonewall Parking Garage. Funding for these projects
included private gifts, state appropriations, revenue bonds and other institutional funds.
The Center has approximately $108 million in capital projects planned for the fiscal year ending June 30,
2011. Major projects include continuing construction of the OU Cancer Institute, upgrades to the Steam and
Chilled Water Plant, and repairs to the Stonewall Parking Garage. Construction is scheduled to begin on the
Enterprise Tier 2 Data Center, Schusterman Center Library, and OU Wayman Tisdale Specialty Health
Center. A remodel of the first floor of the O’Donoghue Building for Geriatric Medicine is also planned.
Work is anticipated to be completed on the Schusterman Center Library.
2010 2009 2008
Land and Infrastructure $ 30.7 $ 31.2 $ 32.2
Buildings 371.0 316.1 257.9
Furniture, Fixtures, and Equipment 41.6 39.8 39.3
Library Materials 6.9 6.8 6.6
Totals $ 450.2 $ 393.9 $ 336.0
Capital Assets, Net, at Year-End (in millions)
x
Debt
2010
At fiscal year-end 2010, the Center had approximately $148 million in outstanding debt, an increase of $25.6
million over the prior year.
The Center entered into one new long term general obligation bond financing arrangement during the current
year totaling $31.6 million. This provided funds to refund certain prior bonds, and to construct, renovate,
remodel, expand and equip certain additions and improvements to parking, utility, and data center facilities on
the Center’s Oklahoma City campus. This also provided funds to advance refund the majority of the series
2001 Student Center revenue bonds. Debt repayments of $6.3 million were made. More detailed
information related to the Center’s long-term liabilities is presented in Note 10 to the financial statements.
2009
At fiscal year-end 2009, the Center had approximately $122.3 million in outstanding debt, an increase of $67
million over the prior year.
The Center entered into one new long term revenue bond financing arrangement during the current year
totaling $70.4 million. This provided the majority of funding for the construction of the OU Cancer Center
on the Oklahoma City campus. Debt repayments of $3.8 million were made. More detailed information
related to the Center’s long-term liabilities is presented in Note 10 to the financial statements.
The following summarizes outstanding debt by type as of June 30:
2010 2009 2008
General Revenue Bonds $ 69.6 $ 69.6 $ 0.0
General Obligation Bonds 31.5 0.0 0.0
Auxiliary Facility Revenue Bonds 11.9 16.4 17.5
Lease Obligations 31.9 32.9 34.3
Notes Payable 3.1 3.4 3.9
Totals $ 148.0 $ 122.3 $ 55.7
Outstanding Debt, at Year-End (in millions)
Economic Outlook
The Center’s economic position is closely related to its role as the state’s primary facility for the training of
healthcare professionals. Future successes are largely dependent upon the ability to recruit and retain highly
qualified students, faculty, and staff, as well as, ongoing financial and political support from state government.
While support from state leadership remains steady, a shortfall in the State’s general revenue resulted in a
1.77% decrease in state appropriations for fiscal year 2011. This includes an offset from State Fiscal
Stabilization Funds under the American Recovery and Reinvestment Act of 2009. Fiscal year 2011 general
xi
Economic Outlook—Continued
revenues are currently meeting state budget projections; however recovery to pre-recession funding levels is
expected to take a number of years.
Despite the downturn in the State’s economy, the Center is well positioned financially to continue its service
to students, patients, the research community, and the citizens of Oklahoma. The professional practice plans
continue to contribute significantly to the Center’s financial performance and are anticipated to remain stable.
In addition, the center expects continued support from private funding and federal grants and contracts.
Audit  Tax  Advisory
Grant Thornton LLP
211 N Robinson, Suite 1200N
Oklahoma City, OK 73102-7148
T 405.218.2800
F 405.218.2801
www.GrantThornton.com
Report of Independent Certified Public Accountants
Board of Regents of the University of Oklahoma
University of Oklahoma Health Sciences Center
Norman, Oklahoma
We have audited the accompanying statements of net assets of the University of Oklahoma
Health Sciences Center (the “Center”) as of June 30, 2010 and 2009, and the related statements
of revenues, expenses and changes in net assets and cash flows for the years then ended. These
financial statements are the responsibility of the Center’s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United
States of America as established by the American Institute of Certified Public Accountants and
the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Center’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in all material respects,
the financial position of the Center as of June 30, 2010 and 2009 and the changes in its net assets
and its cash flows for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated October
8, 2010 on our consideration of the Center’s internal control over financial reporting and on
our tests of its compliance with certain provisions of laws, regulations, contracts and grant
agreements and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that
testing, and not to provide an opinion on the effectiveness of the Center’s internal control over
financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards and should be considered in assessing results of
our audits.
Management’s discussion and analysis and the required supplementary information (schedule
of funding progress, schedule of employer contributions and notes to required supplementary
information) as listed in the table of contents are not a required part of the basic financial
statements but are supplementary information required by accounting principles generally
accepted in the United States of America. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of measurement and
presentation of the required supplementary information. However, we did not audit the
information and express no opinion on it.
Oklahoma City, Oklahoma
October 8, 2010
UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
STATEMENTS OF NET ASSETS
June 30,
Assets 2010 2009
Current Assets
Cash and cash equivalents $ 356,728 $ 292,323
Restricted cash and cash equivalents 58,795 73,946
Short term investments 10,024 10,147
Accrued interest receivable 136 480
Accounts receivable, net of allowances 99,749 105,037
Inventories and supplies 1,487 1,456
Loans to students, net of allowance for uncollectible loans 956 1,001
Deposits and prepaid expenses 711 1,046
Total current assets 528,586 485,436
Noncurrent Assets
Restricted cash and cash equivalents 4,226 4,592
Endowment investments 35,178 32,522
Other long-term investments 5,026 30,322
Pledges receivable - 3,397
Investments in real estate 175 175
Loans to students, net 5,722 5,500
Deposits and prepaid expenses 799 788
Capital assets, net 450,217 393,869
Total noncurrent assets 501,343 471,165
TOTAL ASSETS 1,029,929 956,601
Liabilities
Current Liabilities
Accounts payable and accrued expenses 44,647 43,990
Deferred revenue 3,634 324
Accrued interest payable 2,214 246
Deposits held in custody for others 6,355 6,762
Long-term liabilities, current portion
Accrued compensated absences 23,248 22,969
Post employment benefits obligation 3,427 2,510
Capital lease payable 1,691 1,400
Notes payable 734 520
Revenue bonds payable 6,511 2,345
Total current liabilities 92,461 81,066
Noncurrent Liabilities
Accrued compensated absences 5,453 5,042
Post employment benefits obligation 44,220 28,752
Federal loan program contributions refundable 6,725 6,646
Capital lease payable 30,198 31,587
Notes payable 2,339 2,880
Revenue bonds payable 106,483 83,592
Total noncurrent liabilities 195,418 158,499
TOTAL LIABILITIES 287,879 239,565
Net Assets
Invested in capital assets, net of related debt 302,359 272,693
Restricted for:
Nonexpendable 28,591 28,253
Expendable
Education and general 92,552 85,347
Capital projects 49,099 79,132
Debt service 15,157 7,390
Unrestricted 254,292 244,221
TOTAL NET ASSETS $ 742,050 $ 717,036
($'s in Thousands)
The accompanying notes are an integral part of these financial statements.
5
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
For the year ended June 30,
2010 2009
Operating Revenues
Student tuition and fees (net of scholarship allowances of $3,131
and $3,585 for 2010 and 2009, respectively) $ 56,923 $ 55,848
Patient care (net of provisions for contractual and other adjustments of $379,346
and $317,090 for 2010 and 2009, respectively) 278,877 267,656
Federal grants and contracts 80,617 78,456
State grants and contracts 67,733 68,004
Private grants and contracts 83,512 76,168
Sales and services of educational activities 1,469 1,399
Sales and services of auxiliary enterprises
Steam and chilled water plant revenues
(revenues are pledged as security for the Utility System
Revenue Bonds Series 1998A and 2004) 5,977 6,756
Other (including $65 and $75 from Student Center Revenues for 2010 and 2009 respectively) 12,081 12,621
Other revenues (including $190 and $198 from interest on student loans for 2010 and 2009 respectively) 37,697 33,654
Total Operating Revenues 624,886 600,562
Operating Expenses
Compensation and benefits 509,745 483,847
Contractual services 60,700 65,383
Supplies and materials 57,861 57,714
Depreciation 20,274 18,808
Utilities 12,044 13,436
Communication 5,990 6,136
Scholarships 2,425 2,898
Other 81,933 67,605
Total Operating Expenses 750,972 715,827
Operating Loss (126,086) (115,265)
Nonoperating Revenues and Expenses
State Appropriations 96,371 104,457
State payments from federal ARRA revenue 8,153 -
On-behalf payments 10,090 11,468
Private gifts 9,091 7,130
Interest on indebtedness (5,073) (2,808)
Net investment income 12,765 3,721
Endowment income 8,518 11,049
Net Nonoperating Revenues 139,915 135,017
Income before other revenues, expenses, gains or losses 13,829 19,752
Other Revenue Expenses, Gains or Losses
Federal grants and contracts for capital projects - 3,450
State grants and contracts for capital projects 387 9,817
State appropriations for capital projects 6,466 9,854
Private gifts for capital projects 1,614 5,908
State school land funds 2,754 1,775
Additions to permanent endowments 451 235
Unrealized (loss) gain on investments (487) 903
Change in Net Assets 25,014 51,694
Net assets - beginning of year 717,036 665,342
Net assets - end of year $ 742,050 $ 717,036
($'s in Thousands)
The accompanying notes are an integral part of these financial statements.
6
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
STATEMENTS OF CASH FLOWS
For the Year Ended June 30,
2010 2009
Cash Flows from Operating Activities:
Tuition and fees $ 56,462 $ 56,100
Patient revenues 251,954 242,466
Sales and services of auxiliary enterprises 12,899 11,784
Sales and services of educational activities 1,569 1,573
Steam and Chilled Water Plant revenues 5,990 6,935
Student Center revenues 65 75
Federal grants and contracts 76,060 77,199
State grants and contracts 66,662 61,715
Private grants and contracts 86,471 76,419
Interest on loans receivable 190 198
Other additions 37,620 33,458
Loans issued to students (1,028) (742)
Collection of loans 842 933
Compensation and benefits (482,009) (455,620)
Contractual services (58,716) (64,951)
Supplies and materials, utilities, communications,
scholarships and fellowships, other, and deposits held in custody (128,528) (124,850)
Net cash flows used by operating activities (73,497) (77,308)
Cash Flows from Noncapital and Related Financing Activities:
State appropriations 96,371 104,457
State payments from federal ARRA revenue 8,153 -
Endowment income 11,055 8,983
Private gifts 8,838 7,130
Federal Family Education Loan receipts 62,807 73,393
Federal Family Education Loan disbursements (62,807) (73,393)
Net decrease to Federal loan program contributions refundable 79 83
Net cash flows provided by noncapital and related financing activities 124,496 120,653
Cash Flows from Capital and Related Financing Activities:
Proceeds from bonds payable 31,552 70,407
State grants and contracts for capital projects 1,456 27,097
State appropriations for capital projects 8,354 10,374
Federal grants and contracts for capital projects - 3,700
Private gifts for capital projects 4,297 3,546
Purchases of capital assets (78,615) (79,144)
Principal paid on capital debt and lease (6,305) (3,830)
Interest paid on capital debt and lease (1,440) (1,176)
Endowment gifts 451 235
State school land funds 2,754 1,775
Net cash (used in) provided by capital and related financing activities (37,496) 32,984
Cash Flows from Investing Activities:
Investment income 9,898 11,109
Proceeds from sales and maturities of investments 25,724 68,037
Purchase of investments (237) (17,082)
Net cash flows provided by investing activities 35,385 62,064
Net increase in cash and cash equivalents 48,888 138,393
Cash and cash equivalents - beginning of year 370,861 232,468
Cash and cash equivalents - end of year $ 419,749 $ 370,861
($'s in Thousands)
The accompanying notes are an integral part of theses financial statements.
7
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
STATEMENTS OF CASH FLOWS - CONTINUED
For the year ended June 30,
2010 2009
RECONCILIATION
Operating loss $ (126,086) $ (115,265)
Depreciation expense 20,274 18,808
Loss on disposal of fixed assets 2,333 2,461
OTRS on-behalf contribution 8,470 9,848
Change in current assets and liabilities:
Accounts receivable (does not include endowment) 761 (21,159)
Inventories and supplies (31) (684)
Loans to students (177) 181
Deposits and prepaid expenses 324 1,086
Accounts payable and accrued expenses 657 4,568
Deferred revenue 3,310 50
Compensated absences 690 1,740
Post employment benefits obligation 16,385 15,493
Deposits held in custody for others (407) 5,565
Net cash flows used by operating activities $ (73,497) $ (77,308)
SUPPLEMENTAL CASH FLOW INFORMATION
Assets acquired via capital lease $ 339 $ -
Capitalization of interest $ 1,129 $ 2,412
Unrealized (loss) gain on investments $ (487) $ 903
RECONCILIATION OF CASH AND CASH EQUIVALENTS
TO THE STATEMENT OF NET ASSETS
Current Assets
Cash and cash equivalents $ 356,728 $ 292,323
Restricted cash and cash equivalents 58,795 73,946
Noncurrent assets
Restricted cash and cash equivalents 4,226 4,592
$ 419,749 $ 370,861
($'s in Thousands)
The accompanying notes are an integral part of these statements.
8
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS
June 30, 2010 and 2009
($ in thousands)
9
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Reporting Entity: The financial reporting entity, as defined by Governmental Accounting
Standards Board (“GASB”) Statement No. 14, The Financial Reporting Entity, and as amended by GASB
Statement No. 39, Determining Whether Certain Organizations Are Component Units, consists of the primary
government, organizations for which the primary government is financially accountable and other organizations
for which the nature and significance of their relationship with the primary government are such that exclusion
could cause the financial statements to be misleading or incomplete.
The University of Oklahoma Health Sciences Center (the “Center”) is an agency of the State of Oklahoma
governed by The Board of Regents of the University of Oklahoma (the “Board”) and the Oklahoma State
Regents for Higher Education (the “State Regents”). The Center is a separate operational unit of the University
of Oklahoma, which is a component unit of the State of Oklahoma, and is included in the financial statements
of the State of Oklahoma as part of the Higher Education component unit. The Center consists of seven
academic colleges, including the Colleges of Medicine, Public Health, Allied Health, Dentistry, Nursing,
Pharmacy and the Graduate College. These financial statements do not include the operations of the University
of Oklahoma Norman Campus (the “Norman Campus”), Cameron University or Rogers State University,
which are distinct operational entities that prepare separate financial statements for the Board. Each entity
receives separate state appropriations and prepares separate budgets. These entities are managed as separate
component units of the State of Oklahoma higher education component and supported in large part by separate
systems and management personnel.
The University of Oklahoma Foundation, Inc. (the “OU Foundation”) is an Oklahoma not-for-profit
organization organized for the purpose of receiving and administering gifts intended for the benefit of the
University of Oklahoma as a whole, including both the Norman Campus and the Center. Accordingly, the
resources received and held by the OU Foundation are not entirely or almost entirely held for the benefit of the
Center. As a result, the OU Foundation is not considered a component unit of the Center under the definition
of GASB Statement No. 39.
Faculty members in the Colleges of Medicine, Public Health, Allied Health, Dentistry, Nursing and Pharmacy
may participate in Professional Practice Plans (PPP’s). Faculty who participate in a PPP are primarily
committed to the academic and research programs of the Center; however, they also engage in professional
practice activities related to patient care and services. A significant portion of PPP revenue is generated from
patient care services provided to patients through the OU Medical Center. The OU Medical Center includes
Presbyterian Hospital, University Hospital and Children’s Hospital of Oklahoma, all located in Oklahoma City.
The financial position and operations of the PPP’s are included in the accompanying financial statements of the
Center.
Financial Statement Presentation: The Center’s financial statements are presented in accordance with the
requirements of GASB Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State
and Local Governments, and GASB Statement No. 35, Basic Financial Statements and Management’s Discussion and
Analysis for Public Colleges and Universities. Under GASB Statements No. 34 and No. 35, the Center is required to
present a statement of net assets classified between current and noncurrent assets and liabilities, a statement of
revenues, expenses and changes in net assets, with separate presentation for operating and nonoperating
revenues and expenses and a statement of cash flows using the direct method.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
10
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Basis of Accounting: For financial reporting purposes, the Center is considered a special-purpose government
engaged only in business-type activities. Accordingly, the Center’s financial statements have been presented
using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis,
revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All
intra-agency transactions have been eliminated.
The Center has the option to apply all Financial Accounting Standards Board (“FASB”) pronouncements issued
after November 30, 1989, unless FASB conflicts with GASB. The Center has elected to not apply FASB
pronouncements issued after the applicable date.
Cash Equivalents: For purposes of the statements of cash flows, the Center considers all highly liquid
investments with an original maturity of three months or less to be cash equivalents. Funds invested through
the State Treasurer’s Cash Management Program are considered cash equivalents. Cash equivalents are fully
collateralized by obligations of the U.S. government or its agencies or insured by federal deposit insurance.
Deposits and Investments: The Center accounts for its investments at fair value, as determined by quoted
market prices, in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments
and for External Investment Pools. In accordance with GASB Statement No. 40, Deposit and Investment Risk
Disclosures, an Amendment of GASB Statement No. 3, the Center has disclosed its deposit and investment policies
related to the risks identified in GASB Statement No. 40. Changes in unrealized gain (loss) on the carrying
value of the investments are separately reported in the statements of revenues, expenses and changes in net
assets.
Accounts Receivable: Accounts receivable consist of tuition and fee charges to students and auxiliary enterprise
services provided to students, faculty and staff. Accounts receivable also include amounts due from the federal,
state and local governments, and private sources, in connection with reimbursement of allowable expenditures
made pursuant to the Center’s grants and contracts, construction projects and unspent proceeds from capital
leases. Additionally, a significant portion of the accounts receivable is comprised of amounts due for services
provided through the PPP’s and clinics. Accounts receivable are recorded net of contractual adjustments and
estimated uncollectible amounts.
The Center determines its allowances by considering a number of factors, including the length of time accounts
receivable are past due and the Center’s previous loss history (including historical payment trends by payor for
PPP receivable balances), which is indirectly impacted by the condition of the general economy and the industry
as a whole. The Center writes off specific accounts receivable when they become uncollectible, and payments
subsequently received on such receivables are credited to the allowance for doubtful accounts.
Medical Malpractice Coverage Claims: The Center is covered for medical malpractice risks under a medical
malpractice insurance policy (See Note 16). The Center pays a fixed premium for coverage of malpractice
claims the Center might potentially incur.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
11
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Inventories: Inventories, consisting of merchandise for resale and supplies, are stated at the lower of aggregate
cost or aggregate market. Cost is determined for the various types of inventory using the first-in, first-out and
average cost methods, as deemed appropriate.
Restricted Cash and Investments: Cash and investments that is externally restricted to make debt service
payments maintain sinking or reserve funds, or to purchase capital or other noncurrent assets, are classified as
restricted in the statements of net assets.
Capital Assets: Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of
donation in the case of gifts. The Center’s capitalization policy for furniture, fixtures and equipment, includes
all items with a unit cost of $5 or more and an estimated useful life of greater than one year. Renovations to
buildings, infrastructure and land improvements that significantly increase the value or extend the useful life of
the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in
which the expense was incurred.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally
50 years for buildings, 20 years for infrastructure, 10 years for land improvements, library materials, furniture,
fixtures and equipment and 5 years for vehicles, computers and computer accessories or the duration of the
lease term for capital leases.
Costs incurred during construction of long-lived assets are recorded as construction in progress and are not
depreciated until placed in service. The Center capitalizes interest as a component of capital assets constructed
for its own use. In 2010, total interest incurred was $6,202, of which $1,129 was capitalized. In 2009, total
interest incurred was $5,220, of which $2,412 was capitalized.
Intangible assets are reported with capital assets. Intangible assets subject to amortization are amortized over
their respective estimated useful lives ranging from 5 to 15 years. Intangible assets with indefinite useful lives
are not material to the financial statements.
Capital assets are subject to an evaluation of possible impairment when events or circumstances indicate that the
related changes in carrying amounts may not be recoverable. If required, impairment losses are reported in the
statement of revenues, expenses and changes in net assets. There were no events or changes in conditions
requiring recognition of an impairment loss in either 2010 or 2009.
Deferred Revenues: Deferred revenues consist primarily of grant revenues for which the work on the grant has
not yet been completed. It also consists of prepaid patient revenues on long-term contracts received during the
year, but related to the subsequent accounting period, and amounts received for tuition and fees prior to the end
of the fiscal year but related to the subsequent accounting period.
Compensated Absences: Employees’ compensated absences are accrued when earned. The obligation at the
end of the year and expenditure incurred during the year are recorded as accrued compensated absences in the
statements of net assets, and as a component of compensation and benefit expense in the statements of
revenues, expenses and changes in net assets.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
12
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Noncurrent Liabilities: Noncurrent liabilities include (1) principal amounts of revenue bonds payable, notes
payable, and capital lease obligations with contractual maturities greater than one year; (2) federal loans liability;
and (3) amounts for accrued compensated absences and other liabilities that will not be paid within the next
fiscal year.
Net Assets: The Center’s net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the Center’s total investment in capital assets, net of
outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet
expended for capital assets, such amounts are not included as a component of invested in capital assets, net of
related debt.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type
funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the
principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present
and future income, which may either be expended or added to principal.
Restricted net assets - expendable: Expendable restricted net assets include resources in which the Center is legally
or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state
appropriations, and sales and services of educational departments and auxiliary enterprises. These resources
are used for transactions relating to the educational and general operations of the Center, and may be used at
the discretion of the governing board to meet current expenses for any purpose. These resources also include
auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty
and staff.
When an expense is incurred that can be paid using either restricted or unrestricted resources, the Center’s
policy is to first apply the expense towards restricted resources, and then towards unrestricted resources.
Classification of Revenues: The Center has classified its revenues as either operating or nonoperating revenues
according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions,
such as (1) student tuition and fees, net of scholarship allowances, (2) patient revenues, (3) sales and services
of educational activities, (4) sales and services of auxiliary enterprises, (5) most federal, state, and local grants
and contracts, and (6) interest on student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange
transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating
revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Government Entities
That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
13
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Scholarship Allowances: Student tuition and fee revenues, and certain other revenues from students, are
reported net of scholarship allowances in the statements of revenues, expenses and changes in net assets.
Scholarship allowances are the difference between the stated charge for goods and services provided by the
Center, and the amount that is paid by students and/or third parties making payments on the students’ behalf.
Certain governmental grants, such as Pell grants, and other federal, state or nongovernmental programs, are
recorded as either operating or nonoperating revenues in the Center’s financial statements. To the extent that
revenues from such programs are used to satisfy tuition and fees and other student charges, the Center has
recorded a scholarship allowance.
Tax Status: As a state institution of higher education, the income of the Center is exempt from federal and state
income taxes; however, income generated from activities unrelated to the exempt purpose is subject to income
tax under Internal Revenue Code Section 511 (a)(2)(B).
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect
certain reported amounts and disclosures; accordingly, actual results could differ from those estimates.
New Accounting Pronouncements: In March 2009, GASB issued Statement No. 54, Fund Balance Reporting and
Governmental Fund type Definitions. This Statement establishes fund balance classifications that comprise a
hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon
the use of the resources reported in governmental funds. This statement also provides for additional
classifications as restricted, committed, assigned, and unassigned based on the relative strength of the
constraints that control how specific amounts can be spent. GASB No. 54 is effective for the Center for the
fiscal year beginning July 1, 2010. Management does not believe that the Statement will have any effect on the
Center’s financial statements.
In June 2010, GASB issued Statement No. 59, Financial Instruments Omnibus. The objective of this statement is to
update and improve existing standards regarding financial reporting and disclosure requirements of certain
financial instruments and external investment pools. GASB No. 59 is effective for the Center for the fiscal year
beginning July 1, 2010. Management has not yet determined the effect, if any, of adoption of this statement on
the financial statements.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
14
NOTE 2 - DEPOSITS AND INVESTMENTS
Cash and Cash Equivalents: At June 30, 2010 and 2009, the carrying amounts of the Center’s deposits with the
State Treasurer and other financial institutions were:
June 30
2010 2009
Deposits with the State Treasurer $378,151 $361,510
U.S. financial institutions 32,714 7,714
Deposits with bond trustees 8,884 1,637
$419,749 $370,861
The Center’s deposits with the State Treasurer are pooled with the funds of other State Agencies and then, in
accordance with statutory limitations, placed in financial institutions or invested as the Treasurer may determine,
in the State’s name.
Investments: At June 30, the fair value of the Center’s investments consisted of the following:
2010 2009
U.S. Government securities $ 15,050 $ 40,469
Univ. of Oklahoma Norman Campus
Investment Pool 35,178 32,522
Real Property 175 175
$50,403 $73,166
Investments in the University of Oklahoma Norman Campus Investment Pool consist primarily of investments
in U.S. and International equity funds.
Disclosures for deposits and investments are presented according to GASB Statement No. 40, Deposit and
Investment Risk Disclosures (GASB 40). Accordingly, information regarding the various risk categories for the
Center’s deposits and investments and the policies for managing that risk are included below:
Credit Risk: Credit risk is the risk that the issuer or other counterparty to an investment will not fulfill its
obligation, causing the Center to experience a loss of principal. As a means of limiting exposure to losses arising
from credit risk, the Center limits its exposure to this risk as follows:
 State law limits investments in obligations of state and local governments to the highest rating from at
least one nationally recognized rating agency acceptable to the State Treasurer.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
15
NOTE 2 - DEPOSITS AND INVESTMENTS - CONTINUED
 Short-term investments managed by the Center are generally limited to direct obligations of the United
States Government and its agencies, certificates of deposit and demand deposits.
 The Board has authorized endowment and similar funds to be invested in direct obligations of the
United States Government and its agencies, certificates of deposit, prime commercial paper, bankers
acceptances, demand deposits, corporate debt (no bond below a single A rating by Moody’s Investors
Service or Standard & Poor’s Corporation may be purchased), convertible securities and equity
securities.
 The Center’s fixed income securities are generally limited to holdings of high quality fixed income
securities. As of June 30, 2010 and 2009, the Center’s investment in fixed income securities has a credit
rating of at least BBB as rated by Standard & Poors Corporation.
Custodial Credit Risk: Custodial credit risk is the risk that, in the event of the failure of a depository institution,
the Center will not be able to recover deposits or will not be able to recover collateral securities in the
possession of an outside party. For investments, custodial credit risk is the risk that, in the event of failure of
the counterparty to a transaction, the Center will not be able to recover the value of investment or collateral
securities in the possession of an outside party. As a means of limiting its exposure to losses arising from
custodial credit risk, the Center’s deposit and investment policies limit the exposure to this risk as follows:
 All funds and deposits with the State Treasurer must be fully insured by Federal Deposit Insurance or
collateralized by securities held by the cognizant Federal Reserve Bank.
 All funds on deposit with financial institutions, including trustees related to the Center’s bond indenture
and capital lease agreements, are insured by Federal Deposit Insurance or collateralized by securities
held by the cognizant Federal Reserve Bank, or invested in U.S. Government obligations, in the
Center’s name.
 Investment securities held in bond debt service reserve funds are held by the respective bond trustee
for the benefit of the Center and bondholders.
 Endowment investments are pooled with the University of Oklahoma Norman Campus (“the
University”) and held in the University’s name.
Concentration of Credit Risk: Center investments can be exposed to a concentration of credit risk if significant
amounts are invested in any one issuer. The Center has imposed a limit on the amount the Center may invest in
any one issuer. The majority of the investments are in fixed income funds and investments guaranteed by the
U.S. Government.
Interest Rate Risk: The Center has a formal policy that limits investment maturities as a means of managing its
exposure to fair value losses arising from increasing interest rates. The Center is responsible for determining its
operating cash flow requirements and to insure that adequate funds are available to maintain the Center’s
operations. In determining liquidity needs, the appropriate mix of short-term, intermediate, and long-term
investments will be evaluated. The Center’s investments are categorized by maturity dates to reflect the fair
values that are sensitive to changes in interest rates.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
16
NOTE 2 - DEPOSITS AND INVESTMENTS - CONTINUED
Investment maturities were as follows at June 30, 2010:
Investment Maturities (in Years)
Fair Not Less One to Six to More
Investment Type Value Applicable Than One Five Ten Than Ten
U.S. Government securities $15,050 $ - $10,024 $5,026 $ - $ -
Univ. of Oklahoma Norman
Campus Investment Pool 35,178 35,178 - - - -
Real Property 175 175 - - - -
$50,403 $ 35,353 $10,024 $ 5,026 $ - $ -
Title 70, Section 4306 of the Oklahoma Statutes directs, authorizes, and empowers the Center’s Board of
Regents to hold, invest or sell donor restricted endowments in a manner which is consistent with the terms of
the gift as stipulated by the donor and with the provision of any applicable laws.
The Center has entrusted the University of Oklahoma Norman Campus with a portion of their funds totaling
$35,354 and $32,698 for 2010 and 2009, of which $32,466 and $29,915 are endowment funds. These funds are
held in the Regent’s Fund investments on behalf of the Center.
The reconciliation between investments per the statements of net assets and total investments is as follows at
June 30:
2010 2009
Investments per Statement of Net Assets
Short-term investments $ 10,024 $ 10,147
Endowment investments 35,178 32,522
Other long-term investments 5,026 30,322
Investments in real estate and mineral interests 175 175
Total Investments per Statement of Net Assets $ 50,403 $ 73,166
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
17
NOTE 3 -ACCOUNTS RECEIVABLE
Accounts receivable are shown net of contractual allowances and doubtful accounts in the accompanying
statements of net assets. At June 30, the accounts receivable and allowances are as follows:
2010 2009
Accounts receivable $ 157,607 $ 164,386
Less allowance and contractual adjustments (57,858) (59,349)
Accounts receivable, net $ 99,749 $ 105,037
The following is a breakdown of the June 30 accounts receivable balances:
2010 2009
Auxiliary enterprises
Accounts receivable $ 3,874 $ 4,537
Less allowance (109) (128)
Accounts receivable, net $ 3,765 $ 4,409
PPP patient billings
Accounts receivable $ 101,477 $ 110,567
Less contractual adjustments (52,473) (55,892)
Less allowance (5,276) (3,328)
Accounts receivable, net $ 43,728 $ 51,347
Due from Federal, State, and private grants
Accounts receivable, no allowance $ 49,707 $ 47,194
Student tuition and fees
Accounts receivable, no allowance $ 2,549 $ 2,087
NOTE 4 – NET PATIENT SERVICE REVENUE
The Center has agreements with third-party payors that provide for payments to the Center at amounts
different from its established rates. A summary of the payment arrangements with major third-party payors
follows:
Medicare Inpatient acute care and outpatient services rendered to Medicare program beneficiaries are paid at
prospectively determined rates that vary accordingly to the Current Procedural Terminology (CPT) code billed
by the provider. These codes are established by the American Medical Association and are adopted for use by
the Center for Medicaid and Medicare Services (CMS) as a basis for their provider reimbursement methodology.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
18
NOTE 4 – NET PATIENT SERVICE REVENUE - CONTINUED
Medicaid Inpatient and outpatient services rendered to Medicaid program beneficiaries are reimbursed at a
prospectively determined per diem rate or established fee.
Workers’ Compensation Inpatient and outpatient services rendered under workers’ compensation are reimbursed
according to the State of Oklahoma fee schedule or at a predetermined discount from the State of Oklahoma
fee schedule.
Other Carriers The Center has also entered into payment agreements with certain commercial insurance
carriers, health maintenance organizations and preferred provider organizations. The basis for payment under
these agreements includes prospectively determined rates and discounts from established charges.
NOTE 5 – INVENTORY
Inventories consisted of the following at June 30:
2010 2009
Site support $ 216 $ 219
Telecommunications 331 452
Other service units 136 139
Dental supply store 150 146
Other auxiliaries 7 8
Pharmacies 647 492
$ 1,487 $ 1,456
NOTE 6 - LOANS TO STUDENTS
The Center had student loans outstanding of $6,678 and $6,501 (net of allowance for uncollectible loans of $351
and $342) at June 30, 2010 and 2009, respectively. Student loans made under the Health Professions Student
Loan Program and the Nursing Student Loan Program represented approximately $6,582 and $6,372 of these
amounts. Under these programs, the U.S. Department of Health and Human Services, Bureau of Health
Professions, provides funds for eight-ninths (8/9) of the loans, and the Center provides the remaining funds.
At June 30, 2010 and 2009, $6,724 and $6,646, respectively, are included as federal loan program contributions
refundable in the statements of net assets as these amounts are refundable to the U.S. government upon
cessation of the programs.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
19
NOTE 7 - FUNDS HELD IN TRUST BY OTHERS
The University of Oklahoma (the “University”) has a beneficial interest in the “Section Thirteen State
Educational Institutions Fund” and the “New College Fund” held in the care of the Commissioners of the Land
Office as trustees. The University has the right to receive annually 30% of the distribution of income produced
by “Section Thirteen State Educational Institutions Fund” assets and 100% of the distribution of income
produced by the University’s “New College Fund”.
The University, as a whole, received $10,125 and $6,550 during the years ended June 30, 2010 and 2009,
respectively, which is restricted to acquisition of buildings, equipment or other capital items. Of these amounts,
the Center received approximately $2,753 and $1,775 in 2010 and 2009, respectively. Present state law prohibits
the distribution of any corpus of these funds. The estimated fair value of the total trust fund for the University,
held in trust by the Commissioners of the Land Office, was approximately $127,608 ($123,985 restricted corpus)
and $110,073 ($113,058 restricted corpus) at June 30, 2010 and 2009, respectively. Such trust funds, held by the
Commissioners of the Land Office, have not been reflected in the accompanying financial statements.
In connection with the State Regents’ Endowment Program, the State of Oklahoma has matched contributions
received under the program. The cumulative match amount, plus any retained accumulated earnings, totaled
$97,513 and $95,631 at June 30, 2010 and 2009, respectively, and is invested by the State Regents on behalf of
the Center. The Center will receive an annual distribution of earnings on these funds; however, as legal title of
the state match is retained by the State Regents, only the funds available for distribution, for which the Center
has incurred allowable reimbursable expenses, or $4,542 and $5,593 at June 30, 2010 and 2009, respectively,
have been reflected as assets in the statements of net assets. With regard to the institutional matching funds,
approximately $224,856 and $208,663, of cumulative undisbursed contributions have been made to the OU
Foundation, for the benefit of the Center, and are on deposit with the OU Foundation at June 30, 2010 and
2009, respectively.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
20
NOTE 8 - CAPITAL ASSETS
Capital asset activity for the year ended June 30, 2010, includes the following:
Beginning Ending
Balance Additions Transfers Deductions Balance
Capital assets not being depreciated:
Land $ 26,045 $ - $ - $ - $ 26,045
Construction in-progress 43,685 64,120 (5,927) (997) 100,881
Total capital assets not
being depreciated 69,730 64,120 (5,927) (997) 126,926
Capital assets being depreciated:
Improvements 12,926 32 277 - 13,235
Buildings 344,271 1,492 4,224 - 349,987
Equipment 96,856 11,735 571 (4,040) 105,122
Infrastructure 1,142 - 574 - 1,716
Leasehold improvements 17,093 150 281 - 17,524
Library materials 26,688 1,425 - - 28,113
Total capital assets being
depreciated 498,976 14,834 5,927 (4,040) 515,697
Less accumulated depreciation
Improvements 8,359 1,284 - - 9,643
Buildings 79,223 6,866 - - 86,089
Equipment 56,995 9,209 - (2,705) 63,499
Infrastructure 597 66 - - 663
Leasehold improvements 9,761 1,539 - - 11,300
Library materials 19,902 1,310 - - 21,212
Total accumulated depreciation 174,837 20,274 - (2,705) 192,406
Total capital assets being
depreciated, net 324,139 (5,440) 5,927 (1,335) 323,291
Capital assets, net $ 393,869 $ 58,680 $ - $ (2,332) $ 450,217
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
21
NOTE 8 - CAPITAL ASSETS--CONTINUED
Capital asset activity for the year ended June 30, 2009, includes the following:
Beginning Ending
Balance Additions Transfers Deductions Balance
Capital assets not being depreciated:
Land $ 25,805 $ 240 $ - $ - $ 26,045
Construction in-progress 40,626 29,722 (26,321) (342) 43,685
Total capital assets not
being depreciated 66,431 29,962 (26,321) (342) 69,730
Capital assets being depreciated:
Improvements 12,882 44 12,926
Buildings 282,019 36,271 26,229 (248) 344,271
Equipment 90,513 10,661 81 (4,399) 96,856
Infrastructure 1,132 10 1,142
Leasehold improvements 17,312 710 11 (940) 17,093
Library materials 25,202 1,486 - 26,688
Total capital assets being
depreciated 429,060 49,182 26,321 (5,587) 498,976
Less accumulated depreciation
Improvements 7,074 1,285 - 8,359
Buildings 73,006 6,217 - 79,223
Equipment 51,231 8,746 - (2,982) 56,995
Infrastructure 551 46 - 597
Leasehold improvements 9,022 1,225 - (486) 9,761
Library materials 18,613 1,289 - - 19,902
Total accumulated depreciation 159,497 18,808 - (3,468) 174,837
Total capital assets being
depreciated, net 269,563 30,374 26,321 (2,119) 324,139
Capital assets, net $ 335,994 $ 60,336 $ - $ (2,461) $ 393,869
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
22
NOTE 9 - DEFERRED REVENUE
Deferred revenue consists of the following at June 30:
2010 2009
Auxiliary enterprises and other activities $ 22 $ 29
Long-term contracts 3,612 295
$ 3,634 $ 324
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
23
NOTE 10 - LONG-TERM LIABILITIES
The following is a summary of long-term obligation transactions of the Center for the year ended June
30, 2010:
Issue Interest Maturity Beginning Ending Current
Dates Rates Through Balance Additions Deductions Balance Portion
Bonds, notes and capital leases (In %)
Revenue bonds payable:
Student Center Series 1995 1995 4.25-8.25 11/1/2015 $ 965 $ - $ (965) $ - $ -
Utility System Series 1998 1998 6.50-7.00 7/1/2018 4,925 - (355) 4,570 4,570
Student Center Series 2001 2001 4.25-5.27 6/1/2026 2,736 - (2,623) 113 113
Utility System Series 2004A&B 2004 2.61-4.85 11/1/2019 7,745 - (570) 7,175 591
General Revenue Bonds Series 2008 2008 3.28-6.63 7/1/2036 69,566 24 69,590 1,191
General Obligation Bonds Series 2010A &B 2010 1.24-5.00 7/1/2030 - 31,552 (6) 31,546 46
85,937 31,552 (4,495) 112,994 6,511
Notes payable 3,400 - (327) 3,073 734
ODFA capital leases payable 8,167 339 (969) 7,537 1,019
OCIA capital leases payable 24,820 - (468) 24,352 672
Total bonds, notes, and capital leases 122,324 31,891 (6,259) 147,956 8,936
Other noncurrent liabilities
Accrued compensated absences 28,011 690 - 28,701 23,248
Post employment benefits obligation 31,262 19,365 (2,980) 47,647 3,427
Federal loan program contributions
refundable 6,646 79 - 6,725 -
Total other noncurrent liablities 65,919 20,134 (2,980) 83,073 26,675
Total noncurrent liabilities $ 188,243 $ 52,025 $ (9,239) $ 231,029 $ 35,611
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
24
NOTE 10 - LONG-TERM LIABILITIES - CONTINUED
The following is a summary of long-term obligation transactions of the Center for the year ended June
30, 2009:
Issue Interest Maturity Beginning Ending Current
Dates Rates Through Balance Additions Deductions Balance Portion
Bonds, notes and capital leases (In %)
Revenue bonds payable:
Student Center Series 1995 1995 4.25-8.25 11/1/2015 $ 1,080 $ - $ (115) $ 965 $ 120
Utility System Series 1998 1998 6.50-7.00 7/1/2018 5,260 - (335) 4,925 355
Student Center Series 2001 2001 4.25-5.27 6/1/2026 2,840 - (104) 2,736 109
Utility System Series 2004A&B 2004 2.61-4.85 11/1/2019 8,295 - (550) 7,745 570
General Revenue Bonds Series 2008 2008 3.28-6.63 7/1/2036 - 70,407 (841) 69,566 1,191
17,475 70,407 (1,945) 85,937 2,345
Notes payable 3,903 - (503) 3,400 520
ODFA capital leases payable 9,071 - (904) 8,167 932
OCIA capital leases payable 25,270 - (450) 24,820 468
Total bonds, notes, and capital leases 55,719 70,407 (3,802) 122,324 4,265
Other noncurrent liabilities
Accrued compensated absences 26,271 1,740 - 28,011 22,969
Post employment benefits obligation 15,769 18,003 (2,510) 31,262 2,510
Federal loan program contributions
refundable 6,562 84 - 6,646 -
Total other noncurrent liablities 48,602 19,827 (2,510) 65,919 25,479
Total noncurrent liabilities $ 104,321 $ 90,234 $ (6,312) $ 188,243 $ 29,744
Revenue Bonds Payable
In FY09, General Revenue Bonds, Series 2008A and 2008B, were issued by the Board of Regents
pursuant to the Master Resolution establishing the University of Oklahoma Health Sciences Center
General Revenue Financing System in support of funding for the OU Cancer Institute. The revenue
pledged as security for these obligations is any or all revenues of the Center which are lawfully available
for the payment of obligations, excluding revenues appropriated by the state legislature (except for in
certain circumstances the Dedicated Tobacco Tax Revenues), funds whose purpose has been restricted
by the donors or grantors to a purpose inconsistent with the payment of such obligations, and any funds
pledged for Prior Encumbered Obligations.
In FY10, General Obligation Bonds, Series 2010A and 2010B, were issued by the Board of Regents
pursuant to the Master Resolution establishing the University of Oklahoma Health Sciences Center
General Revenue Financing System. These bonds were issued to provide funds to refund certain prior
bond issues, and to construct, renovate, remodel, expand and equip certain additions and improvements
to parking, utility, and data center facilities on the Center’s Oklahoma City campus. The revenue pledged
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
25
NOTE 10 - LONG-TERM LIABILITIES - CONTINUED
as security for these obligations is any or all revenues of the Center which are lawfully available for the
payment of obligations, excluding revenues appropriated by the state legislature, funds whose purpose
has been restricted by the donors or grantors to a purpose inconsistent with the payment of such
obligations, and any funds pledged for prior encumbered obligations.
Revenue bonds issued prior to the Resolution (Prior Encumbered Obligations) are payable both as to
principal and interest from the net revenues arising from operations of the physical plant utilities system
and certain student fees which are pledged under the various bond indentures. At June 30, 2010 and
2009, the Center had $5,850 and $1,636 respectively, of cash and investments held in trust for the bond
indentures, restricted to the payment of principal and interest.
Tulsa Campus Series 2003 Defeasance
On December 5, 2006, the Board of Regents of The University of Oklahoma authorized the issuance of
the $3,500 Board of Regents of the University of Oklahoma on behalf of the University of Oklahoma
Health Sciences Center Refunding Revenue Note, Series 2007 (the “Series 2007 Note”). The proceeds
of the Series 2007 Note along with existing Center funds were used to advance refund the remainder of
the $17,770 The Board of Regents of the University of Oklahoma University of Oklahoma Tulsa Campus
Revenue Bonds Series 2003A (the “Series 2003 Bonds”) which was loaned to the Board of Regents of the
University of Oklahoma and used in the acquisition of the Tulsa Campus located at 4502 E. 41st Street,
Tulsa, Oklahoma. The Series 2007 Note is dated June 1, 2007 and is payable solely from the net revenues
of the clinical operations of the Tulsa branch of the University of Oklahoma College of Medicine. The
Series 2007 Note bears interest at 3.94% and is payable over 8.5 years, with annual payments of $489.
The outstanding balance at June 30, 2010 and 2009 was $2,591 and $2,781 respectively. In accordance
with the advanced refunding, the Center deposited $17,360 into an escrow fund and purchased
government securities bearing interest in amounts sufficient to pay the Series 2003 Bonds at January 1,
2014. Accordingly, the Series 2003 Bonds are considered to have been extinguished and neither the 2003
Series Bonds nor the associated escrow fund are included in the University’s statements of net assets as
of June 30, 2010. The balance of the 2003 Series Bonds outstanding at June 30, 2010 and 2009 was
$14,910 and $15,770 respectively.
Refunding
Prior to June 30, 2010, part of the new Series 2010A/B bonds were used to currently refund the $845
outstanding principal balance of the Series 1995 Student Center Revenue bonds. The Series 1995 bonds
were loaned to the Board of Regents of the University of Oklahoma to construct a student center on the
Oklahoma City campus.
Also prior to June 30, 2010, the Series 2010A/B bonds were used to advance refund $2,535 of the series
2001 Student Center bonds. The remaining principal balance of $115 will be paid by the Center
according to the bond schedule on June 1, 2011. The Series 2001 bonds were loaned to the Board of
Regents of the University of Oklahoma to construct, renovate, remodel, furnish, equip and expand a
Student Center, pavilion and intramural playing field on the Center’s Oklahoma City campus. The
applicable portion of the 2010A bonds is payable over 16 years. The outstanding balance at June 30,
2010 is $2,655. In accordance with the advanced refunding, the Center deposited $2,697 into an escrow
fund and purchased government securities bearing interest in amounts sufficient to pay the Series 2001
bonds at December 1, 2011. Accordingly, the $2,535 of the Series 2001 bonds is considered to have been
extinguished and neither these bonds nor the associated escrow fund are included in the Center’s
statement of net assets as of June 30, 2010.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
26
NOTE 10 - LONG-TERM LIABILITIES - CONTINUED
Capital Lease Obligations
ODFA Master Lease Obligations
In August 2005, the Center entered into a 7 year lease agreement with ODFA and the State Regents as
beneficiary of a portion of the proceeds from the Oklahoma Development Finance Authority Oklahoma
State Regents for Higher Education Master Lease Revenue Bonds Series 2005B. The Center financed
$2,300 to upgrade the parking access system. Assets under this capital lease totaled $1,267 and $1,472 net
of accumulated depreciation of $1,033 and $828 at June 30, 2010 and 2009. Depreciation expense on
these capital lease assets is included in depreciation expense on the statements of revenues, expenses and
changes in net assets.
In May 2006, the Center entered into a 5 year lease agreement with ODFA and the State Regents as
beneficiary of a portion of the proceeds from the Oklahoma Development Finance Authority Oklahoma
State Regents for Higher Education Master Lease Revenue Bonds Series 2006A. The Center financed
$940 to purchase two mammography systems. Assets under this capital lease totaled $548 and $641 net
of accumulated depreciation of $392 and $299 at June 30, 2010 and 2009 respectively. Depreciation
expense on these capital lease assets is included in depreciation expense on the statements of revenues,
expenses and changes in net assets.
In December 2007, the Center entered into a 15 year lease agreement with ODFA and the State Regents
as beneficiary of a portion of the proceeds from the Oklahoma Development Finance Authority
Oklahoma State Regents for Higher Education Master Lease Revenue Bonds Series 2007B. The Center
financed $6,067 to renovate the Medical Student Education Facility on the Oklahoma City, Oklahoma
campus. Assets under this capital lease totaled $5,824 and $5,946 net of accumulated depreciation of
$243 and $121 as of June 30, 2010 and 2009, respectively. Depreciation expense on these capital lease
assets is included in depreciation expense on the statements of revenues, expenses and changes in net
assets.
In December 2007, the Center entered into a 15 year lease agreement with ODFA and the State Regents
as beneficiary of a portion of the proceeds from the Oklahoma Development Finance Authority
Oklahoma State Regents for Higher Education Master Lease Revenue Bonds Series 2007C. The Center
financed $1,304 to construct a cooling tower on the Tulsa Oklahoma campus. Assets under this capital
lease totaled $1,250 and $1,276 net of accumulated depreciation of $54 and $28 at June 30, 2010 and
2009 respectively. Depreciation expense on these capital lease assets is included in depreciation expense
on the statements of revenues, expenses and changes in net assets.
In July 2009, the Center entered into a 5 year lease agreement with ODFA and the State Regents as
beneficiary of a portion of the proceeds from the Oklahoma Development Finance Authority Oklahoma
State Regents for Higher Education Master Lease Revenue bonds Series 2009B. The Center financed
$333 to purchase a Practice Management System. Assets under this capital lease totaled $287 net of
accumulated depreciation of $46 at June 30, 2010. Depreciation expense on these capital lease assets is
included in depreciation expense on the statements of revenues, expenses and changes in net assets.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
27
NOTE 10 - LONG-TERM LIABILITIES - CONTINUED
OCIA Capital Lease Obligations
In the fall of 2005, the Center entered into a 25 year lease agreement with the Oklahoma Capital
Improvement Authority (“OCIA”) and the Oklahoma State Regents for Higher Education as beneficiary
of a portion of the proceeds from the OCIA State Facilities Revenue Bonds, Series 2005F and 2005G.
The Center received $26,146 of the proceeds for capital improvement projects on the Oklahoma City and
Tulsa Campuses as approved by the Regents. Assets and construction in progress under these capital
leases totaled $25,196 and $25,713, net of accumulated depreciation of $950 and $433 at June 30, 2010
and 2009, respectively.
Lease payments made by the State of Oklahoma on behalf of the Center are held by the OCIA for future
principal and interest payments of the OCIA Bonds. The OCIA deposits the lease payments into an
interest-bearing fund and may use the interest earnings to reduce the Center’s future lease payments.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
28
NOTE 10 - LONG-TERM LIABILITIES - CONTINUED
Lease payments made by the State of Oklahoma on behalf of the Center are held by the OCIA for future
principal and interest payments of the OCIA Bonds. The OCIA deposits the lease payments into an
interest-bearing fund and may use the interest earnings to reduce the Center’s future lease payments.
Maturities of principal and interest requirements on revenue bonds payable, capital lease obligations and
notes payable are as follows at June 30, 2010:
2016 2021 2026 2031 2036
2011 2012 2013 2014 2015 2020 2025 2030 2035 2040 Total
Student Center Series 1995 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Utility System Series 1998 4,722 - - - - - - - - - 4,722
Student Center Series 2001 120 - - - - - - - - - 120
Utility System Series 2004A&B 874 873 874 869 874 4,361 - - - - 8,725
Cancer Center - 2008 4,832 4,825 4,822 4,819 4,806 23,993 23,888 23,908 23,799 9,478 129,170
General Obligation - 2010 707 2,829 3,083 3,083 3,073 14,187 11,345 3,542 256 - 42,105
Total principal and interest 11,255 8,527 8,779 8,771 8,753 42,541 35,233 27,450 24,055 9,478 184,842
Less: interest 4,744 4,940 4,827 4,699 4,545 19,795 14,080 8,977 4,764 477 71,848
Total principal 6,511 3,587 3,952 4,072 4,208 22,746 21,153 18,473 19,291 9,001 112,994
Capital leases 3,144 2,922 2,571 2,572 2,527 13,174 11,475 9,885 - 48,270
Less: interest 1,453 1,390 1,331 1,280 1,225 5,173 3,230 1,299 - - 16,381
Total principal 1,691 1,532 1,240 1,292 1,302 8,001 8,245 8,586 - - 31,889
Notes payable 902 659 702 489 489 245 - - - - 3,486
Less: interest 168 97 79 41 23 5 - - - - 413
Total principal 734 562 623 448 466 240 - - - - 3,073
Total $ 8,936 $ 5,681 $ 5,815 $ 5,812 $ 5,976 $ 30,987 $ 29,398 $ 27,059 $ 19,291 $ 9,001 $ 147,956
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
29
NOTE 11 - OPERATING LEASES
The Center has entered into certain other operating leases for equipment, office space, vehicles and other
miscellaneous items. All operating leases are for a one-year term with an option to renew based on
available funding. Rental expenditures under all operating leases were approximately $7,813 and $6,454
for 2010 and 2009, respectively.
NOTE 12 - RETIREMENT PLANS
The Center’s academic and nonacademic personnel are covered by various retirement plans depending on
job classification. The plans available to Center personnel include the Oklahoma Teacher’s Retirement
System, the University of Oklahoma Defined Contribution Plan, and the University of Oklahoma
Defined Contribution Plan for Hourly Employees who are not participants of the Oklahoma Teachers’
Retirement System.
A summary of significant data for each of the retirement plans follows:
 Defined Benefit Plan
Plan Description: The Center contributes to the Oklahoma Teachers’ Retirement System (the “OTRS”
or the “System”), a cost-sharing multiple-employer public employee retirement system which is self-administered.
The OTRS provides retirement, disability, and death benefits to plan members and
beneficiaries. The benefit provisions are established and may be amended by the legislature of the State
of Oklahoma. Title 70 of the Oklahoma statutes, Sections 17-101 through 116.9, as amended, assigns the
authority for management and operation of the plan to the Board of Trustees of the System.
The System issues a publicly available annual financial report that includes financial statements and
required supplementary information for the OTRS. That annual report may be obtained by writing to
the OTRS, P.O. 53524, Oklahoma City, OK 73152 or by calling (405)-521-2387, or at the OTRS website
at www.trs.state.ok.us.
Funding Policy: The System members and the Center are required to contribute at a rate set by statute.
The contribution requirements of the System members and the Center are established and may be
amended by the legislature of the State of Oklahoma.
The 2010 and 2009, the contribution rate for System members of 7% is applied to their total
compensation for those employees participating.
For 2010 the local employer contribution rate was 8.05% for Jul-Dec 2009 and 8.55% for Jan-Jun 2010
while in 2009, the local employer contribution rate due from the Center was 7.55% for Jul-Dec 2008 and
8.05% for Jan-Jun 2009. For the years ended June 30, 2010 and 2009, the State contributed 5% of State
revenues from sales and use taxes and individual income taxes. Contributions made by the State from
the dedicated taxes are considered on-behalf payments for the Center’s employees. The amount
benefiting the Center’s employees is estimated at $8,470 and $9,848 for the years ended June 30, 2010
and 2009, respectively, based on an allocation of the Center’s covered payroll to total payroll for the
OTRS.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
30
NOTE 12 - RETIREMENT PLANS - CONTINUED
The Center’s contributions to the System for the years ended June 30, 2010, 2009, and 2008 were
approximately $12,399, $11,661, and $10,942, respectively, and were equal to the required contributions
for each year.
 Defined Contribution Plans – Optional Retirement Plan
Plan Description: Monthly employees, hired July 1, 2004 or later, who would have been previously
required to participate in OTRS, now have the option to elect either OTRS (along with Plans 1 or 2
described below) or the Optional Retirement Plan (ORP) within the first 90 days of employment. This is
a one-time election and if an employee does not make an election, the employee defaults into OTRS and
will also participate in Plan 1 or 2 of the Defined Contribution Plan noted below. Hourly employees not
participating in OTRS are also included in this plan; however their option to not participate in OTRS is
revocable and can be changed upon their request.
Under the ORP, the Center contributes, at the direction of the participating employee, to four separate
retirement investment firms. The four firms are: 1) the Teachers Insurance Annuity Association -
College Retirement Equities Fund, 2) Fidelity Investments Company, 3) ING (Aetna) Retirement Plans,
and 4) The Vanguard Group of Investment Companies. The ORP is a non-contributory defined
contribution plan and the four participating retirement investment firms are separately managed. The
authority for contributing to the Defined Contribution plans is contained in the following policy
document, “University of Oklahoma Defined Contribution Retirement Plan”, amended and restated July
2004.
Funding Policy: The ORP provisions and contribution requirements are established and may be
amended by the Center. The Center’s contribution rate is 9% of covered payroll and is determined by
the previously mentioned plan document. The Center’s contributions to the ORP for the years ended
June 30, 2010, and 2009, were approximately $13,242 and $11,559, respectively. Employees do not
contribute to the ORP. The vesting period for the ORP is three years.
 Defined Contribution Plan –Plan 1 and Plan 2
Plan Descriptions: For employees participating in OTRS, contributions to the defined contribution plan
fall into Plan 1 or Plan 2 depending upon the employee’s participation date. The Center contributes at
the direction of the participating employee, to four separate retirement investment firms. The four firms
are: 1) the Teachers Insurance Annuity Association - College Retirement Equities Fund, 2) Fidelity
Investments Company, 3) ING (Aetna) Retirement Plans, and 4) The Vanguard Group of Investment
Companies. Plans 1 and 2 are non-contributory defined contribution plans and the four participating
retirement investment firms are separately managed. The authority for contributing to the Defined
Contribution plans is contained in the following policy document, “University of Oklahoma Defined
Contribution Retirement Plan”, amended and restated July 2004.
Funding Policy – Plan 1 and Plan 2 provisions and contribution requirements are established and may be
amended by the Center. The Center’s contribution rate is 15% for Plan 1 and 8% for Plan 2 of covered
payroll and is determined by the previously mentioned plan document. Total contributions to Plans 1
and 2 were $11,829 and $5,829, respectively, for the year ended June 30, 2010. Total contributions to
Plans 1 and 2 were $11,968 and $5,705, respectively, for the year ended June 30, 2009. Employees do not
contribute to Plans 1 and 2. The vesting period for both Plan 1 and Plan 2 is three years.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
31
NOTE 13 - OTHER POST-EMPLOYMENT BENEFITS
Plan Description – Health and dental insurance is provided by the Center for all retirees who began
employment prior to January 1, 2008, and meet specific age and service requirements. Employees hired
on or after January 1, 2008, have the ability to continue to participate in the medical and dental plans at
the group rates at the retiree’s own expense. Retirees may also elect the Center’s health and dental
coverage for eligible dependents at their own expense. The Center has the authority to establish and
amend the benefit provisions offered to retirees. The Center’s retiree insurance plan is considered a
single-employer defined benefit plan. After retirees become eligible for Medicare primary coverage, those
participating in the OTRS (see Note 12) are provided with the Oklahoma State and Education
Employees Group health plan as a secondary plan. For retirees not participating in OTRS, the Center’s
insurance continues in a secondary role. The Center’s plan does not issue a standalone financial report.
Funding Policy - For the Center’s plan, the contribution requirement is based on a projected pay-as-you-go
basis. The funding policy may be amended by the Regents of the University. The Center pays the
premiums for the retirees. On June 30, 2010, 1,189 retirees met the age and service eligibility
requirements. For the years ended June 30, 2010 and 2009, the Center contributed $2,980 and $2,510,
respectively, for current retirees.
Annual OPEB Cost and Net OPEB Obligation – The Center’s annual other postemployment benefit
(OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC),
an amount actuarially determined in accordance with the parameters of GASB No. 45. The ARC
represents the level of funding that, if paid on an ongoing basis, is projected to cover normal cost each
year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty
years. The following table shows the components of the Center’s annual OPEB cost, the amount
actually contributed by the Center, and changes in the Center’s net OPEB obligation for the years ended
June 30:
2010 2009
Annual Required Contribution (ARC) and annual OPEB cost $ 19,366 $ 18,003
Contributions paid during year (2,981) (2,510)
Increase in net OPEB obligation 16,385 15,493
Net OPEB obligation-beginning of year 31,262 15,769
Net OPEB obligation-end of year $ 47,647 $ 31,262
Funded Status and Funding Progress – The unfunded actuarial accrued liability, totaled $152,003 as of
the January 1, 2010 actuarial valuation date. The initial unfunded actuarial accrued liability (UAAL) is
being amortized over an open period of thirty years using the level percentage of projected covered
payroll amortization method. The covered payroll (annual payroll of active employees covered by the
plan) was $249,437 and the ratio of the UAAL to the covered payroll was 61 percent.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions
about the probability of occurrence of events far into the future. Examples include assumptions about future
employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of
the plan and the annual required contributions of the employer are subject to continual revision as actual
results are compared with past expectations and new estimates are made about the future. The schedule of
funding progress, presented as required supplementary information following the notes to the financial
statements, presents multi-year trend information about whether the actuarial value of plan assets is
increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
32
NOTE 13 - OTHER POST-EMPLOYMENT BENEFITS -CONTINUED
Actuarial Methods and Assumptions – Projections of benefits for financial reporting purposes are based
on the Retirement Policy document, amended as of July 1, 2002. The actuarial methods and assumptions
used include techniques that are designed to reduce the effects of short-term volatility in reported
amounts and reflect a long-term perspective of the calculations. In the January 1, 2010 actuarial valuation
date, the entry age actuarial cost method was used. The actuarial assumptions include the following: a 6
percent investment rate of return, which is based on the expected long-term investment returns of the
Center’s own investments, an annual healthcare cost trend rate of 9.5 percent initially, reduced by
decrements to 4.5 percent after seven years, and a payroll annual inflation rate of 3 percent.
NOTE 14 - RISK MANAGEMENT
Due to the diverse risk exposure of the Center, the insurance portfolio contains a comprehensive variety
of coverage. Oklahoma Statutes require participation of all State agencies in basic general liability, tort
claim coverage, directors and officers liability, and property and casualty programs provided by the State
of Oklahoma Department of Central Services Risk Management Division (“DCSRMD”). In addition to
these basic policies, the Center’s Department of Risk Management establishes guidelines in risk
assessment, risk avoidance, risk acceptance and risk transfer.
The Center and individual employees are provided sovereign immunity when performing official business
within the scope of their employment under the Oklahoma State Tort Claims Act.
Beyond acceptable retention levels, complete risk transfer is practiced by purchasing conventional
insurance coverage either directly from a provider or through DCSRMD. These coverages are as follows:
 The buildings and contents are insured for replacement value. Each loss incident is subject to a $500
deductible.
 General liability and tort claim coverages (including comprehensive general liability, auto liability,
personal injury liability, aircraft liability, watercraft liability, leased vehicles and equipment) are
purchased by the Center from DCSRMD. To complement coverage provided by State Statute,
additional coverage is purchased based on specific departmental and institutional needs and risks, but
the related risks are not considered material to the Center as a whole. The Center has not filed any
claims in any of the past three fiscal years.
Self-Funded Programs
The Center’s workers’ compensation program is self-funded and is administered by a third party. The
Center maintains a cash deposit with the administrator and reimburses the administrator for claims paid
on a monthly basis and administrative expenses are paid on a quarterly basis. Benefits provided are
prescribed by State statute and include lump sum payments for rated disabilities, in addition to medical
expenses and a portion of salary loss, resulting from an on-the-job injury or illness. The Center records a
liability for workers’ compensation in its financial statements based on annual actuarial valuations. As of
June 30, 2010 and 2009, the accrued workers’ compensation liability totaled approximately $2,534 and
$2,274, respectively.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
33
NOTE 14 - RISK MANAGEMENT - CONTINUED
The Center’s unemployment compensation insurance program is also self-funded. Unemployment
benefits that separated employees receive are determined by Oklahoma Statutes and are administered by
the Oklahoma Employment Security Commission (“OESC”). As a reimbursing employer, the Center is
billed quarterly by the OESC for benefits paid to former employees. The Center’s reserve with the
OESC is the average claims paid over the past three years. As of June 30, 2010 and 2009, the required
reserve was $299 and $227, respectively. The minimum cash balance is considered each year during the
fringe benefit rate-setting process.
NOTE 15 - CONTINGENCIES AND COMMITMENTS
At June 30, 2010 and 2009, the Center had outstanding commitments under construction contracts of
$78,839 and $25,127, respectively.
In the normal course of operations, the Center is a defendant in several lawsuits; however, Center
officials are of the opinion, based on the advice of in-house legal counsel, that the ultimate outcome of
this litigation will not have a material effect on the future operations or financial position of the Center.
The Center receives grants and other forms of reimbursement from various federal and state agencies.
These activities are subject to audit by agents of the funding authority, the purpose of which is to ensure
compliance with conditions precedent to providing such funds. Management believes that the liability, if
any, for reimbursement which may arise as the result of audits, would not be material.
NOTE 16 – AFFILIATES AND RELATED PARTY TRANSACTIONS
HCA Health Services of Oklahoma, Inc. d/b/a OU Medical Center
The Center has contracts with HCA Health Services of Oklahoma, Inc. d/b/a OU Medical Center
(“HCA”) for the Center’s staff to provide in-service education and administrative duties within University
Hospital and Children’s Hospital of Oklahoma, two of the institutions comprising the OU Medical
Center. In addition, the Center provides phone services and steam and chilled water for heating and
cooling purposes to the OU Medical Center. Total sales and services under the above transactions were
approximately $30,022 and $26,516 for 2010 and 2009, respectively. Amounts due from HCA for such
transactions was $5,102 and $4,586 as of June 30, 2010 and 2009, respectively, and is included in accounts
receivable, net of allowances, on the statement of net assets.
The Tulsa Foundation for Health Care Services, Inc.
The Tulsa Foundation for Health Care Services, Inc. (the “Tulsa Foundation”) is an Oklahoma not-for-profit
organization organized for the benefit of, to perform the functions of, or carry out the purposes of,
the University of Oklahoma College of Medicine – Tulsa Bedlam Clinic and/or successor clinics. The
purposes of the Tulsa Foundation are exclusively charitable, educational and research, specifically to
receive funds from various entities to provide compassionate medical and health care services for the
underserved community in the greater Tulsa area with an emphasis on caring for children and their
families through the Bedlam Clinic, or its successor entities. The economic resources received and held
by the Tulsa Foundation for the benefit of the Center are not significant to its overall financial position.
As a result, the Tulsa Foundation is not considered a component unit of the Center under the definition
of GASB Statement No. 39.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
34
NOTE 16 – AFFILIATES AND RELATED PARTY TRANSACTIONS - CONTINUED
The Academic Physicians Insurance Company
The Academic Physicians Insurance Company (the “Captive”), formed in 2006, is a not-for-profit
insurance company formed and domiciled in the State of Vermont as an Alternative Risk Financing
Vehicle for the purpose of financing the medical professional liability insurance for College of Medicine
faculty practicing as OU Physicians. Premiums paid by the Center to obtain professional liability
coverage from the Captive totaled $9,989 and $9,063 for fiscal years 2010 and 2009 respectively, thus
eliminating the Center’s deductible expense for current and future claims. As of and for the year ended
June 30, 2010, the economic resources of the Captive include total assets of $38,622 total revenue of
$9,171 and total fund balance of $15,273. The Captive is not considered a component unit of the Center
under the definition of GASB Statement No. 39, as the economic resources received and held by the
Captive are not significant to the Center’s overall financial position and the Center is not entitled to, or
have the ability to otherwise access a majority of the resources received or held by the Captive.
University of Oklahoma Norman Campus
As discussed in Note 1, the University of Oklahoma Norman Campus (“Norman Campus”) is an agency
of the State of Oklahoma governed by The Board of Regents of the University of Oklahoma and the
Oklahoma State Regents for Higher Education. The Norman Campus is a distinct operational entity
from the Center. However, Norman Parking and Transportation/CART had incurred two bond system
obligations, each of which a portion was used to benefit the Center’s Parking and Transportation.
Although there is no legal note obligation that the Center must reimburse Norman Campus for their
portion of the principal and interest payments of the related bond obligations, the Center has agreed to
reimburse Norman Campus for their portion of the debt service. This is reflected in the financial
statements as a note payable, with current and noncurrent portions separately stated. With respect to the
2004 Parking Refunding bonds, during the years ended 2010 and 2009, the Center made principal and
interest payments of $167 and $166 to Norman Campus, leaving a balance due of $483 and $620 at June
30, 2010 and 2009, respectively.
The University of Oklahoma Foundation
The OU Foundation is a private foundation organized to receive and administer gifts for the benefit of
the Norman Campus and the Center. At June 30, 2010 and 2009, the OU Foundation had audited net
assets of approximately $748,830 and $669,341, respectively. The OU Foundation expended on behalf of
the Norman Campus and the Center approximately $117,867 in 2010 and $104,978 in 2009 for facilities
and equipment, salary supplements, general educational assistance, faculty awards and scholarships. Of
these expenditures, $10,603 in 2010 and $13,085 in 2009 are reflected in the Center’s financial statements
as revenue or private gifts and expenditures. The amounts not reflected herein consist of direct OU
Foundation expenditures for general university educational purposes and amounts reflected in the
Norman Campus financial statements.
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
35
NOTE 17 - SEGMENT INFORMATION
The following financial information represents identifiable activities for which one or more revenue
bonds are outstanding. These activities provide student facilities and utilities for the Center.
CONDENSED STATEMENT OF NET ASSETS 2010 2009 2010 2009
Assets:
Current assets $ 789 $ 759 $ 9,586 $ 5,387
Non-current assets - 61 71
Capital assets 5,175 5,272 24,750 24,545
Total assets 5,964 6,031 34,397 30,003
Liabilities
Current liabilities 114 249 5,373 1,154
Long-term liabilities - 3,473 6,583 11,744
Total liabilities 114 3,722 11,956 12,898
Net assets:
Invested in capital assets net of related debt 5,061 1,570 13,006 11,875
Restricted
Expendable
Capital projects 279 313 589 570
Debt service 57 47 5,710 1,492
Unrestricted 453 379 3,136 3,168
Total Net Assets $ 5,850 $ 2,309 $ 22,441 $ 17,105
CONDENSED STATEMENT OF REVENUES,
EXPENSES AND CHANGES IN NET ASSETS
Operating revenues $ 832 $ 843 $ 11,713 $ 12,670
Operating expenses:
Depreciation expense (161) (162) (836) (828)
Other expenses (359) (362) (9,576) (10,852)
Net operating income 312 319 1,301 990
Nonoperating expenses 3,229 (189) 4,035 (603)
Change in net assets 3,541 130 5,336 387
Net assets at beginning of year 2,309 2,179 17,105 16,718
Net assets at end of year $ 5,850 $ 2,309 $ 22,441 $ 17,105
CONDENSED STATEMENT OF CASH FLOWS
Net cash flows - operating activities $ 312 $ 318 $ 1,292 $ 1,160
Net cash flows - capital and related financing (291) (256) 2,843 (977)
Net cash flows - investing activities 9 10 55 63
Net increase in cash and cash equivalents 30 72 4,190 246
Cash and cash equivalents at beginning of year 756 684 4,870 4,624
Cash and cash equivalents at end of year $ 786 $ 756 $ 9,060 $ 4,870
Series 1995, 2001 2004A, 2004B
Bonds Series 1998,
Student Center Utility System Revenue
Revenue Bonds
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
($ in thousands)
36
NOTE 18 – SUBSEQUENT EVENTS
The Center has evaluated events and transactions that occurred subsequent to June 30, 2010 through
October 8, 2010, the date these financial statements were available to be issued, for potential recognition
or disclosure in the financial statements.
At their June 2010 meeting, the Board authorized the sale of the Sheridan Campus property to the Tulsa
Child Abuse Network, Inc. The closing on this property was completed on September 29, 2010, for a
sale price of $1,230. The book value of the campus is $1,437, net of accumulated depreciation of $751.
NOTE 19 - FUNCTIONAL CLASSIFICATIONS
For the years ended June 30, 2010 and 2009, the following table represents operating expenses within
functional classification:
2010 2009
Function
Instruction $175,102 $175,034
Research 80,509 80,608
Public service 31,637 31,445
Academic support 40,154 39,521
Student services 3,599 3,664
Institutional support 31,349 34,947
Operations and maintenance of plant 23,876 29,872
Scholarships/Fellowships 2,300 3,052
Clinical operations 340,911 302,830
Agency 10 7
Auxiliary enterprises 3,256 4,015
Service unit 13,060 16,075
Plant * 5,209 (5,243)
Total Operating Expenses $750,972 $715,827
* Plant expenditures in 2009 reflect a credit due to internal funding which was completed in a subsequent
fiscal year from the initial expenditure. When expenditures occur, the Plant function is initially charged.
Subsequent to the initial expenditure, if internal funding is used to ultimately pay the expense, the cost is
moved from the Plant function to a function assigned to the internal source. This will result in a credit in
Plant expenditures during years in which internal funding is more than the amount of the expenditures.
REQUIRED SUPPLEMENTARY INFORMATION
THE UNIVERSITY OF OKLAHOMA HEALTH SCIENCES CENTER
REQUIRED SUPPLEMENTARY INFORMATION
($ in thousands)
June 30, 2010
38
University of Oklahoma Health Sciences Center Retiree Health/Dental Insurance
Schedule of Funding Progress
UAAL as a
Actuarial Actuarial Accrued Unfunded Percentage
Actuarial Value of Liability (AAL) AAL Funded Covered of Covered
Valuation Assets --entry age (UAAL) Ratio Payroll Payroll
Date (a) (b) (b-a) (a/b) (c) ((b-a)/c)
1/1/2008 $ - $ 127,932 $ 127,932 - $ 236,540 54%
1/1/2010 $ - $ 152,003 $ 152,003 - $ 249,437 61%
The Center obtains actuarial valuation biannually in accordance with the provisions of GASB No. 45.
Schedule of Employer Contributions
Annual Percentage
Fiscal Employer Required of ARC Net OPEB
Year End Contributions Contribution Contributed Obligation
June 30, 2008 $ 2,233 $ 18,002 12.40% $ 15,769
June 30, 2009 $ 2,510 $ 18,003 13.90% $ 31,262
June 30, 2010 $ 2,980 $ 19,366 15.40% $ 47,648
Notes to Required Supplementary Information
Annual Required Contributions
See Note 13 for actuarial assumptions and other information used to determine the annual required
contributions (ARC) for the plan.
Audit  Tax  Advisory
Grant Thornton LLP
211 N Robinson, Suite 1200N
Oklahoma City, OK 73102-7148
T 405.218.2800
F 405.218.2801
www.GrantThornton.com
39
Report of Independent Certified Public Accountants on Internal Control Over
Financial Reporting and on Compliance and Other Matters Based on an
Audit of Financial Statements Performed in Accordance with Government
Auditing Standards
Board of Regents of the University of Oklahoma
University of Oklahoma Health Sciences Center
Norman, Oklahoma
We have audited the accompanying financial statements of the University of Oklahoma Health
Sciences Center (the “Center”) as of and for the year ended June 30, 2010, and have issued our
report thereon dated October 8, 2010. We conducted our audit in accordance with auditing
standards generally accepted in the United States of America as established by the American
Institute of Certified Public Accountants and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of the United
States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the Center’s internal control over
financial reporting as a basis for designing our audit procedures for the purpose of expressing
an opinion on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of the Center’s internal control over financial reporting. Accordingly, we express
no such opinion.
A deficiency in internal control over financial reporting exists when the design or operation of a
control does not allow management or employees, in the normal course of performing their
assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material
weakness is a deficiency, or combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the entity’s
financial statements will not be prevented, or detected and corrected on a timely basis.
40
Our consideration of internal control would not necessarily identify all deficiencies in internal
control over financial reporting that might be material weaknesses. Given these limitations,
during our audit we did not identify any deficiencies in the Center’s internal control over
financial reporting that we consider to be material weaknesses. However, material weaknesses
may exist that were not identified.
Our audit was also not designed to identify all deficiencies in internal control over financial
reporting that might be significant deficiencies. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control over financial reporting that is less severe than a
material weakness, yet important enough to merit attention by those charged with governance.
We identified certain deficiencies in internal control over financial reporting, described in the
accompanying Schedule of Findings and Questioned Costs as Item 2010-1, that we consider to
be a significant deficiency in the Center’s internal control over financial reporting.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Center’s financial statements are
free of material misstatement, we performed tests of its compliance with certain provisions of
laws, regulations, contracts and grant agreements, noncompliance with which could have a
direct and material effect on the determination of financial statement amounts. However,
providing an opinion on compliance with those provisions was not an objective of our audit
and, accordingly, we do not express such an opinion. The results of our tests disclosed no
instances of noncompliance or other matters that are required to be reported under Government
Auditing Standards.
This report is intended solely for the information and use of the Audit and Finance Committee,
Board of Regents, management, federal awarding agencies and pass-through entities and is not
intended to be and should not be used by anyone other than these specified parties.
Oklahoma City, Oklahoma
October 8, 2010